Over the past few years, Advanced Micro Devices’ (AMD) exceptional climb up the semiconductor food chain has resulted not only in increased market share for its products but has been mirrored by massive share price gains for the stock. Not so in 2021, a year which has disappointed investors so far.

However, Wells Fargo’s Aaron Rakers thinks there are several reasons to believe AMD shares will be back on the front foot soon enough.

With server CPU momentum a “key focus,” the analyst thinks the company can “continue to gain PC and server CPU market share and see mix-driven GM% expansion.” Throw into the mix the prospective addition of Xilinx – the acquisition is expected to close by the end of 2021 – and the risk/reward paradigm for the stock looks “attractive.”

Looking ahead to the upcoming Q2 results, Rakers expects “continued momentum” in the company’s 7nm Rome and Milan EPYC server CPUs. The analyst thinks the strong showing will boost investors’ confidence in the company’s ability to reach a 20%+ shipment share.

“As a reminder,” the 5-star analyst noted, “AMD's Milan EPYC ramp entails a much broader systems OEM adoption: 100+ systems vs. nominal # of systems with Rome, as well as a continued broadening (+2x) cloud adoption with 400+ AMD-based cloud instances expected by the end of 2021.”

Although Rakers thinks the focal point still revolves around “shipment share momentum,” the ramping of the 7nm Zen 3 Milan EPYC CPU product cycle remains “underappreciated.”

This is due to the benefit of a higher ASP (average selling price) for the Milan line-up compared to the Rome product line; Mercury Research estimatees a more than 50% ASP for Milan vs. Rome.

Considering the recent “increased uncertainty” for Intel’s next-gen Sapphire Rapids (10nm Enhanced SuperFin) and Granite Rapids (7nm) Xeon-SP processor roadmaps, Rakers thinks continued EPYC roadmap execution will remain an important factor in maintaining investors’ confidence.

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Overall, Rakers remains confident in AMD’s ability to execute and reiterates an Overweight (i.e. Buy) rating on the shares. The analyst also gives the stock a $120 price target that implies a potential upside of 38%. (To watch Rakers’ track record, click here)

Overall, the Street’s average price target clocks in at $106.94, implying shares will add 23% of muscle in the coming months. Overall, the stock has a Moderate Buy consensus rating, based on 12 Buys and 8 Holds. (See AMD stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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