Advanced Micro Devices drops on Piper Sandler downgrade on growth concerns
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Advanced Micro Devices (NASDAQ:AMD) shares are dropping in early Thursday trading after Piper Sandler downgraded the stock and cut its price target due to a number of concerns, including a slowing PC market.
Analyst Harsh Kumar cut his rating to neutral, down from overweight, and lowered his price target to $130, noting that not only could the company get hurt by the slowing PC market this year, but there could be earnings and growth headwinds from the Xilinx (NASDAQ:XLNX) deal and "the broader market dynamics around high-multiple, high-growth technology stocks."

"Given these three dynamics, we feel there is more downside risk than upside risk at this point in time," Kumar wrote in a note to clients. "Therefore, we are downgrading the stock to Neutral."
Advanced Micro Devices (AMD) shares are down nearly 2% to $125.82 on back of the downgrade.
Kumar added that it's not expected that AMD's fundamentals breakdown "in the near-term" and there should not be missed estimates over the next two quarters, but "we do see a combination of slower growth and a slowing PC environment burdening the stock."
Xilinx (XLNX) is expected to generate $4 billion in sales this year, which would be 10% growth year-over-year, but when factored in with AMD's own growth rate, the combined revenue growth rate could be between 21% and 22%, which would be slower than AMD has grown in the past.
Kumar acknowledged that profitability would improve, with operating margins approaching 26%, but the analyst expects the deal to add "only ... a few cents" in earnings in the first full year, which is below what was initially expected.
"As a result, the deal may prove to lead to more fatigue in the near term than benefit given the lower growth profile and limited initial cost cuts," Kumar added.
Earlier this month, Wells Fargo reiterated its overweight rating on Advanced Micro Devices (AMD) and $180 price target.