The COVID-19 pandemic has caused a boom in PC sales, and supply chain issues have driven prices higher, but analysts see declining sales and a normalization of the supply/demand environment in 2022, sending a few stocks down on Thursday.
Advanced Micro Devices Inc. AMD,
Shares closed 8.3% lower at $109.34 in trading Thursday after Barclays analyst Blayne Curtis downgraded the stock on concerns that several end markets served by the chip maker are preparing for a correction.
While the analyst said he expects AMD to exceed its 31% growth target this year and continue to take market share from Intel Corp. INTC,
He wants to move to the sidelines for now.
“The key issue here is what will be AMD’s growth trajectory resulting from this potential correction, and the answer to this will be how competitive Intel and ARM will be in 2024/25,” the analyst wrote.
Morgan Stanley analyst Erik Woodring sounded a similar alarm in a note downgrading the two largest US computer makers, HP Inc. HPQ,
and Dell Technologies Inc. DELL,
“We see increased risks of negative hardware budget revisions, hardware earnings reviews peaking, and the potential for further multiple stress, which has historically resulted in underperforming IT hardware” — the weight of the weight gain, Woodring wrote. “Specifically, we believe spending on PCs and consumer devices will come under pressure as supply improves and demand returns to normal after two years of above-trend growth.”
The analyst also lowered his price targets for both stocks, moving HP to $31 from $34 and Dell to $60 from $66. He suggested investors wanting to take a piece of the hardware industry instead look to CDW Corp. CDW,
which he upgraded to overweight of equal weight, raising the target price to $214 from $201.
Dell shares closed 7.6% lower at $50.19, and HP shares closed 6.5% lower at $36.30.
Even with Thursday’s drop, AMD shares are still up 39% over the past 12 months, compared to a 9.7% gain in the PHLX Semiconductor SOX Index,
and a 14% increase in the S&P 500 SPX,
HP and Dell stocks have performed roughly in line with the S&P 500 over the past 12 months, up 12.6% and 14.3%, respectively.