Advanced Micro Devices' strength in the personal-computer market coupled with the stock pullback turned Piper Sandler analyst Harsh Kumar bullish on the stock.
The analyst upgraded his rating to Overweight from Neutral and lifted the price target on the stock to $140 from $98.
Shares of AMD (ticker: AMD) are down more than 34% year-to-date to $97.85, even while "the company's core businesses are running really well," Kumar said.
"We are using the recent price action to get constructive on the name again, as our downgrade thesis of a slowing PC market and the lack of near-term accretion from Xilinx doesn't appear to be playing out as expected," Kumar said in a note on Tuesday.
Chip maker Xilinx was acquired by the semiconductor company in February. The asset appears to be making a solid contribution right out of the gate, with three quarters of over 20% growth, the analyst said.
On the PC front, several analysts have cut ratings on tech names as the overall PC market is experiencing some softness. Last month, research firm IDC said worldwide shipments for personal computers fell 5% year over year in the March quarter due to lower consumer demand and supply-chain issues. Morgan Stanley analyst Erik Woodring had cut his ratings on Dell Technologies to Equal Weight from Overweight, and HP to Underweight from Equal Weight in March.
Kumar, who had downgraded AMD in January, now feels the weakness in the PC market is mostly coming from the consumer side and hence, AMD's push into the commercial market has come at the right time.
AMD, in its recent earnings release, said it is focusing more on the stronger commercial and higher-end portion of the PC business and was less affected by the overall PC market softness. Earnings per share of $1.13 in the March quarter were higher than the estimate of 91 cents, according to FactSet data. Revenue -- including Xilinx -- was $5.9 billion, above analysts' expectations of $5.01 billion.
AMD stock rose 8.7% on Tuesday.
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