Semiconductor sector-specific ETFs were leading the charge Wednesday after a Nomura Instinet analyst provided an optimistic outlook for Advanced Micro Devices (NasdaqGS: AMD) and Intel (NasdaqGS: INTC).
Among the best performing non-leveraged ETFs of Wednesday, the SPDR S&P Semiconductor ETF (NYSEArca: XSD) increased 2.3%, iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) advanced 2.0% and VanEck Vectors Semiconductor ETF (NYSEArca: SMH) rose 2.1%, with the Philadelphia Semiconductor index rising as much as 3% earlier to a record high.
Nomura Instinet analyst David Wong initiated coverage for AMD, issuing a “buy” rating and a price target of $33 for AMD shares or 20% above the stock’s level, TheStreet reports.
“We think that AMD’s high revenue growth and rapidly improving profitability justify what we consider to be an elevated multiple on an EPS estimate that may still be a fair amount below the company’s earnings power,” Wong said, adding that AMD looks to have a strong footing in two areas of the microprocessor GPU markets, compared to Nvidia and Intel, which each are strong in just one area. Plus, “AMD has an opportunity to gain [market]share.”
AMD shares surged 8.1% to $28.9 per share on Wednesday. AMD makes up 4.3% of SOXX, 3.9% of XSD and 4.0% of SMH’s underlying holdings.
Wong also initiated coverage on Intel with a “buy” rating and a $65 price target, or 20% above the stock’s current level.
“Margin expansion and share count reductions potentially driving EPS growth above top-line growth,” Wong said of Intel.
The analysts believed that profit margins could expand, making profits healthier. Meanwhile, a share count reduction, through buybacks, would further make earnings per share more attractive – Intel has exhibited a long history of share buybacks and Wong thinks it can return $16 billion to shareholders through buybacks.
INTC shares gained 1.8% to $55.4 per share on Wednesday. INTC makes up 13.6% of SMH’s underlying portfolio, 3.3% of XSD and 7.7% of SOXX.
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