What happened
Semiconductor giant Advanced Micro Devices (NASDAQ: AMD) stock is up 4.2% as of 12:30 p.m. ET Monday — the first trading day of the New Year.
You can thank Goldman Sachs for that.
Image source: Getty Images.
So what
In a note out this morning, investment bank Goldman Sachs announced it is keeping AMD on its “conviction list” and reiterated its opinion that AMD stock is a “top pick” for 2022, reported StreetInsider.com.
AMD is enjoying “design win momentum,” argues the analyst, as more and more server manufacturers choose to put AMD chips in their devices. And Goldman believes this will result in greater market share for AMD, especially as it grows its production capacity through “proactive co-investments.” Gross margins also appear to be improving, and with them, operating profit margins as well, which will in turn lead to net profits much stronger than what most of Wall Street is expecting.
Now what
How much stronger? Goldman sees “significant upside to Street estimates” in both 2022 and 2023, and believes that AMD could earn “non-GAAP” profits of $4.30 per share this year and $6.47 next year — 28% and 60% above consensus analyst estimates, respectively. As the rest of Wall Street comes around to its point of view, Goldman believes that earnings estimates will be revised higher, helping to boost AMD’s stock price toward its price target of $170 per share.
Accordingly, even after watching AMD stock gain 57% in 2021, Goldman sees more room for outperformance this year — about 13% — enough to justify maintaining a buy rating on the stock.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
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