Advanced Micro Devices, Inc. (NASDAQ: AMD) isn't off to the best of starts in the pre-market hours this morning, and for good reason. The stock was hit by a big downgrade, leading to fear among investors and pushing the value of the stock toward the bottom. Of course, our partners at Trade Ideas were the first to alert us to the declines. At the moment (8:40), AMD is trading at $13.27 per share after a loss of $0.53 per share (3.84%) thus far today.
Barclays Downgrades AMD
As mentioned above, Advanced Micro Devices isn't having the best of times in the pre-market hours this morning after Barclays made the decision to downgrade the stock. Barclays Analyst Blayne Curtis downgraded the stock from equal weight to underweight. In the process, the analyst cut the price target to $9 per share, saying it will reach this mark within a year. That's a 35% implied downside and the target is 31% below the consensus average of $13.01 per share. So, what's the big deal?
One of the big issues here is that the market is currently pricing AMD based on expectations of many that the company will take a large chunk of Intel's market share. While a slice may be taken out of Intel by AMD, the analyst believes that there's not going to be enough to cause the company to maintain its exorbitant price.
Another big factor here has to do with the cryptocurrency boom that recently took place. After all, Bitcoin and Ether miners must use high-end technology in order to efficiently do their work. However, Wall Street is warning that the cryptocurrency boom could run out of steam relatively soon, and that's bad news for AMD. After all, cryptocurrency values are starting to fall, and when prices fall, mining isn't quite as lucrative.
So, the idea here is that AMD has a price that includes expectations of continued growth in demand thanks to cryptocurrency mining as well as an expectation of Advanced Micro Devices taking a large chunk of Intel's market share in this space. However, the analyst behind the downgrade simply doesn't believe that this is the case.
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What We'll Be Watching For Ahead
Moving forward, the CNA Finance team will be keeping a close eye on AMD. In particular, we're interested in following the company to see if a demand shortage does start to take place as cryptocurrency prices fluctuate. However, we believe that various key factors were left out of the expectations here. Perhaps, the most important of these factors is that AMD is likely to take a large chunk of Intel's market share in the data center industry. Nonetheless, we'll continue to follow the story closely and bring the news to you as it breaks!
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