Morgan Stanley raised its price target on Advanced Micro Devices to $465 from $410 while keeping an Equalweight rating, pointing to stronger 2027 earnings estimates. The bank flagged warrant issuances tied to two customers as a drag on profitability over the next three to four years, even as it noted strength in AMD's CPU business and its Helios product line.
Morgan Stanley lifted its price target on Advanced Micro Devices to $465 from $410, while maintaining an Equalweight rating on the stock. AMD shares currently trade at $518.58, having delivered a 197.5% return over the past year.
Earnings outlook drives the target increase
The firm cited improved earnings estimates for calendar year 2027, which rose to $15.09 from $13.13 in its Modelware forecast. The new price target applies a roughly 31 times multiple to the updated earnings-per-share projection, which includes stock-based compensation.
Morgan Stanley noted that AMD's CPU business shows strength, and it expects the company's Helios product to gain market share next year. However, AMD is issuing more than $15 billion in warrants for every $15 billion to $20 billion in revenue from two customers.
Warrants weigh on profitability
The analyst said the warrant issuances, while potentially effective for stimulating customer interest, represent a cost that would eliminate profitability if treated as a cash expense. This dynamic affects the company's earnings over the next three to four years, according to Morgan Stanley.
Even so, the roughly 31 times price-to-earnings multiple represents a premium to large-cap AI semiconductor peers Nvidia and Broadcom, reflecting opportunities in server CPUs and potential growth in artificial intelligence, the firm said. According to Investing.com: an InvestingPro tip notes the stock is "trading at a high earnings multiple," with the current P/E ratio at 176x, and the platform's analysis suggests AMD appears overvalued relative to its Fair Value.
Other analysts see more room to run
Several other firms have issued more bullish calls on AMD in recent weeks. KeyBanc reiterated an Overweight rating with a $725 price target, highlighting second-quarter results and third-quarter guidance that surpassed consensus estimates, with the Data Center segment posting 107% year-over-year growth and AI GPU revenue up 190%.
Bernstein and Jefferies both raised their targets to $650, with Bernstein citing a third-quarter revenue outlook of $13 billion, above the Street estimate of $12.5 billion. Truist Securities lifted its target to $594, and Roth/MKM reiterated a Buy rating with a $650 target, both pointing to accelerating demand in AMD's data center products.
Source: Investing.com
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