AMD edges higher; Morgan Stanley restarts coverage on cloud, PC outlook
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Advanced Micro Devices (NASDAQ:AMD) shares rose almost 1% Wednesday as Morgan Stanley analyst Joseph Moore restarted coverage on the semiconductor company, noting it is in a position to gain market share in both cloud servers and PCs.
Moore set an outperform rating and $103-a-share price target on AMD's (AMD) stock, saying that the company's shares are now at a "reasonable valuation". Moore also said AMD's (AMD) continued solid growth likely suggests that its shares have "over corrected" in recent months.
"The demand picture across all of the end markets is mixed given the plateauing economy," Moore said. "[And] we see share gains and mix improvement allowing them to power through more than most with double digit growth next year." Moore added that with AMD's (AMD) share price down more than 48% from its high points in late 2021 "we see the risks as largely priced in."
Delving deeper, Moore noted that AMD's (AMD) purchase of Xilinx should help fuel its growth, as products tied to the acquisition plus its existing data center business now make up "approximately 50% of gross profit dollars." Moore said such business could grow to as much as 65% or 70% of AMD's (AMD) gross profit in the next two or three years.
Regarding the PC market, Moore expects AMD (AMD) to see a "material correction" this year and in 2023. But, Moore said it's likely that AMD (AMD) will make "minor share gains" in PC clients and "material gains" in servers, both of which are likely to keep the company's growth strong. 
Moore expects AMD (AMD) to see desktop PC-related revenue fall 26% year-over-year in 2022 and 2% in 2023, and lose some market share due to the success of Intel's (INTC) Alder Lake processor in the gaming market. However, Moore said AMD (AMD) should see "relative stability thereafter."
Regarding notebooks, AMD (AMD) is expected to see continued gains, with revenue up 35% in 2022, and then turning flat in 2023, as it takes away market share from Intel (INTC) and with a continued correction in the overall notebook market.
"Overall we are optimistic that the company's prospects in [the] data center will provide enough growth to drive further positive estimate revisions over the next several quarters," Moore said, who added that consumer-linked markets could cause apprehensions, but AMD (AMD) is less exposed to those areas than its competitors. 
Earlier this month, AMD (AMD) held its analyst day where it updated its product roadmap and financial targets.