JUMP REPORT

COVID-19 has had ruinous consequences for many companies, but you’d be hard pressed to find any negative impact on perennial winner Advanced Micro Devices (AMD). The chip maker has swatted away the pandemic and has continued the market trouncing performance it set off on some half a decade ago.Heading into next week’s earnings (October 27, AMC), in possession of a year-to-date share gain of 78%, RBC analyst Mitch Steves pounds the table for more AMD upside.The 5-star analyst anticipates a “beat and raise” and, as such, lifts his price target from $84 to $92. This figure implies additional upside of 13% over the following months. Needless to say, Steves’ rating stays an Outperform (i.e. Buy). (To watch Steves’ track record, click here)So, what’s behind the target increase?Steves explained, “Our checks remain positive and we anticipate: 1) upside to gaming numbers due to higher than expected demand, 2) upside on PC CPUs as well given the continued strength from WFH initiatives – we also think AMD is continuing to gain share against Intel and 3) the steady share gains on the server side should continue and the firm should reach low-mid teens share (up from 10%) in the next 2-3 quarters.”Steves also addresses the recent rumored takeover of semiconductor peer Xilinx. Investors’ initial negative reaction to the estimated $30 billion deal was based on the fear the purchase amounts to a “defensive minded transaction.” Steves believes the noise surrounding the acqusition means “the focus has shifted away from AMD's current core/organic growth story.” However, the analyst expects such worries will “likely fade” so long as AMD “can produce organic results that meet/exceed expectations.”In addition to cementing AMD’s status as a large-cap semiconductor company, those in favor of the deal also highlight the acquisition’s potential to help AMD “expand into the communications sub-segment” and point to AMD's success when going head to head against Intel in the CPU segment.So, that’s RBC’s view, let’s see now what the rest of the Street has in mind for the high-flying chip maker. AMD's Moderate Buy consensus rating is based on 11 Buys, 13 Holds and 1 Sell. The $86.26 average price target suggests modest upside of 6% from current levels. (See AMD stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.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.

Intel (INTC) inks agreement with SK hynix to sell its NAND operations for $9 billion and use the proceeds to strengthen its presence in the AI, 5G networking and edge computing markets.

Advanced Micro (AMD) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Analyst adds a “negative catalyst watch” to Xilinx, given that the stock has rallied 10% on reports of deal talks.

(Bloomberg Opinion) — Intel Corp. has stumbled lately. To right itself, the semiconductor giant needs to get back to basics and prioritize its main business. An exit from the memory industry will help that effort.The company agreed to sell its Nand memory-chip subsidiary to South Korea’s SK Hynix Inc. for about $9 billion, the Asian chipmaker said in a statement late Monday New York time. Despite large investments in flash memory, Intel has never been able to become a big player in these types of semiconductors, which are used in storage devices inside computer hard drives and consumer electronics. That’s a problem because in a commodity market such as memory, leadership and size are essential to generate profits over the long term. With no prospects for large gains on the horizon, Intel is smart to give up on memory. First, the move can help the company’s bottom line. Earlier this month, Raymond James estimated Intel could boost its annual free cash flow by $2 billion if it left the memory business. Second, the prospects of this part of the chip industry aren’t very promising. This, analysts say, is because market leader Samsung is willing to flood the market if necessary to defend its leading position, without regard to maintaining its prices. Not a great situation for the other smaller players. Even Micron Technology Inc. CEO Sanjay Mehrotra hinted at those difficult industry dynamics during his earnings call last month. He noted the industry needs to reduce its factory investments if chipmakers wanted to improve the market’s profitability. This is a battle Intel doesn’t need to fight. But most importantly, Intel needs to focus on its primary business: central-processing unit (CPU) chips. Frankly, the company has gotten distracted with several needless acquisitions and forays into disparate markets such as security software, smartphone wireless chips and programmable FPGA chips. All those areas don’t matter if the company loses technical leadership in the CPU market. And after Intel revealed in July that another next-generation chip based on 7-nanometer manufacturing technology would be delayed, most analysts now believe Advanced Micro Devices Inc. has the prime position to make the fastest, best-performing processors for several years. A $9 billion deal isn’t going to fix all the problems of a $200 billion company. But every step toward a more focused Intel is a positive.(Updates throughout to reflect that Intel agreed to sell its memory business to SK Hynix.)This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.