AMD will rally another 44% as it snaps up more semiconductor market share, Bank of America says (AMD)

Steve Marcus/Reuters

• Advanced Micro Devices' strong third quarter earnings pave the way for improved market share in the $50 billion semiconductor industry, Bank of America analysts said Wednesday.
• The team lifted its price target for AMD shares to $110 from $100, implying a 44% climb from Wednesday's closing level over the next 12 months.
• The company's consistent execution on lofty goals establishes it as the "idiosyncratic share gainer," particularly as rivals such as Intel lag behind, the analysts said.
• Watch AMD trade live here.

Advanced Micro Devices' third quarter strength sets the company up for blockbuster growth in the $50 billion processor market, Bank of America said Wednesday.

The semiconductor producer reported earnings and revenue that beat analyst estimates on Tuesday. The company also lifted its current-quarter revenue growth forecast to 41% from 32%. Robust server sales and demand for AMD-powered gaming consoles fueled the outperformance. 

Analysts led by Vivek Arya lifted their price target for AMD shares to $110 from $100 on the encouraging third quarter results. The new target implies a 44% climb from Wednesday's closing level over the next 12 months. AMD's continued expansion in the chip market establishes the firm as the "idiosyncratic share gainer" while its biggest competitors lag, the team said.

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"We believe AMD's pipeline, management execution, and opportunity set are significantly enhanced by slip-ups at key rival Intel, which sets AMD up for material share gains in the duopolistic $50 billion CPU market," they wrote in a note to clients.

The bank's estimates signal AMD captured 13% of the market's revenue in the third quarter, up from 10% in the previous three-month period. That share is set to climb to 15% in the current quarter as AMD launches new server and PC chips, the team added.

AMD's third quarter report also confirmed the company's acquisition of chipmaker Xilinx for $35 billion. The deal is slated to close by the end of next year and give AMD a significant leg up in the communications technology business. The deal "is a good use of AMD's premium valuation," the analysts said, and should add $3 to the firm's earnings per share by 2023.

Still, the acquisition will likely fuel some volatility, they added. AMD shares are up roughly 72% year-to-date, significantly outperforming the broader market. Risks from US-China trade tensions and execution of its lofty goals could also encumber its uptrend in the near term, the team said.

AMD traded at $78.19 per share as of 11:25 a.m. ET. The company has 22 "buy" ratings, 12 "hold" ratings, and one "sell" rating from analysts, with a median price target of $66.50.

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