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Morningstar | Raising AMD FVE to $19 As We Incorporate 2019 Share Gains; However, Intel Will Rebound in 2020. See Updated Analyst Note from 30 May 2019

After taking a fresh look at our x86 server and PC market share estimates, we are raising our fair value estimate for AMD to $19 per share from $13 per share. During Intel’s first-quarter conference call, the firm reduced its full-year 2019 revenue guidance by $2.5 billion to $69 billion (which implies a 3% year-over-year decline), while AMD anticipates full-year 2019 revenue to be up in the mid-single digits (which implies a 45% jump in second half sales over the first half). Collectively, these outlooks insinuate share loss for Intel in both the data center and PC CPU markets as AMD ramps up new offerings. While we do anticipate share gains for AMD, we also think intensified competition will bring out the best in Intel. Consequently, our differentiated view is that no-moat AMD’s share gains will not persist at the rate implied by current stock levels (of both Intel and AMD). Our fair value estimate for wide-moat Intel remains $65 per share.

At its investor meeting on May 8, Intel's management set relatively manageable revenue targets of $77 billion in three years (and $85 billion by the 2023 timeframe), which implies low-single-digit top-line growth from 2018. Importantly, Intel's 10-nanometer process is on track with (PC) products set to ship in June while 7-nm will ramp in 2021 with EUV lithography. Although 2019 will be challenging for Intel due to macro weakness and share loss to AMD, we anticipate stable growth thereafter as the firm revitalizes its manufacturing strategy following its 10-nm mishap. AMD is well-positioned with its Rome products ramping in the third quarter and will likely approach 10% server CPU unit share by the end of the year. All in, shares of Intel look highly compelling at current levels while shares of AMD appear expensive.