AMD stock: Wells Fargo sees a 'tricky' earnings setup

With AMD (NASDAQ:AMD) stock down in recent weeks, analysts at Wells Fargo previewed the company’s first-quarter earnings report.

Unfortunately for investors, Wells Fargo sees the company as having a “tricky setup” into the print.

Why AMD stock is down in recent weeks

AMD’s stock price has experienced a significant decline, falling over 20% in the last month and a further 5% in the last week of trading, now hovering around the $170 per share level. This is a stark contrast to just a few weeks ago when the stock was trading above the $200 per share mark.

Artificial intelligence related stocks have surged this year, and AMD, as one of those stocks, has benefitted. However, interest rate uncertainty has helped to weigh on AMD shares, while there have also been questions regarding the company’s current valuation. With questions about its outlook also coming into play, AMD’s stock has experienced a move lower in recent weeks.

Tesch stocks, including semiconductor chip names, are generally sensitive to interest rate movements as the companies sometimes rely on borrowing to fund research and development.

Even so, some analysts remain bullish. On Monday, Melius raised the price target on AMD to $265 from $192 while maintaining a Buy rating.

The firm said AMD is “looking like the ‘Nvidia mini.’”

“With a chip optimized for the inferencing explosion, AMD is just getting going as AI models move into production,” said Melius. ”AMD’s chart even feels like a mini-Nvidia on a delay.”

“Nvidia continues to do AMD and everyone else a favor by expanding the market and driving awareness,” added Melius. “Their success has only accelerated the desire for a (distant) number 2 branded provider."

Wells Fargo sees a tricky earnings setup

Despite the positivity from Melius, analysts at Wells Fargo, when previewing the chipmaker’s first quarter earnings report, said they see a “tricky setup” for the company.

“AMD discussions remain focused on the MI300X upside bogey,” said the bank. “AMD sentiment has waned over the past month given: 1. Possible cuts in MSFT's MI300X deploy — we see this as too narrowly cited. 2. Concern over Samsung (KS:005930) HBM3 supply for MI300X — we see this concern as overdone. 3. A renewed/deepened appreciation for NVDA's full stack post-GTC — we agree; we still model AMD's at a sub-10% DC GPU share.”

Wells Fargo estimates that AMD has had a 40% or more server CPU ship share in hyperscale cloud in the past — a share position they see as more likely higher for internal workloads compared to external hyperscale cloud services.

With this in mind, the bank said that investors will be interested in AMD's thoughts on whether they have seen any signs of a recovery in traditional servers within their hyperscale cloud customers while also garnering an increased share in external services. Furthermore, they state AMD's share trends in traditional system OEMs also remain an incremental growth driver.

Wells Fargo models AMD’s first quarter revenue at $5.46 billion and its EPS at $0.62.