Morgan Stanley gives AMD an overweight rating! Target price: $103

Morgan Stanley believes that the PC market seems likely to enter the next revision stage, will continue to believe in the strength of the server market growth, and make a prudent budget for next year. It is expected that the company will maintain steady growth with the current reasonable valuation. Morgan Stanley gave AMD an overweight rating and a target price of $103.

Although the demand situation in all end markets is different due to economic stagnation, Morgan Stanley believes that the stock has been over-adjusted-it can be seen that the stock earnings and portfolio improvement will enable AMD to surpass most companies with double-digit growth next year. With the stock falling by more than 48% from the high point in the fourth quarter, Morgan Stanley believes that the risks have been basically digested. Morgan Stanley's expectation is slightly higher than the 22-year market consensus, although it is far lower than the 23-year cycle data. Through analysis, Morgan Stanley believes that although the seller's data is outdated, the current anxiety reflects the worse result.

AMD has sold off sharply around the macro issues affecting its business consumers, with PC processors, graphics cards, and game consoles accounting for 55% of its revenue. We expect meaningful adjustments in PCs in the next few quarters. But importantly, data centers and Xilinx products now account for about 50% of the total profits. As both have great market share growth potential, Morgan Stanley expects this figure to reach 65%-70% in the next 2-3 years.

After the recent sell-off, AMD offers the potential of solid figures at a reasonable valuation, which may be our best chance to achieve consistent figures this year and next. Morgan Stanley's expectations for AMD and similar companies are lower than the market consensus, but AMD is closer to the consensus than its peers, and its valuation has been revised more than other high-growth companies (such as MRVL and NVDA).

Morgan Stanley expects that the PC market will undergo a major adjustment this year and next, but the small increase in PC client market share and the significant growth of the server market should push the company to continue to grow.

Morgan Stanley multiplied the 23 times multiplier by the EPS of $4.48 to get the target price of $103. This multiple chosen by Morgan Stanley is at the low end of our expectations for high-growth semiconductor large enterprises (slight discount to MRVL and significant discount to NVDA).