Market appears bored with AMD’s Pensando acquisition


  • AMD has announced the $1.9 billion acquisition of Pensando.
  • Advanced Micro Devices stock lost more than 1% on Friday.
  • Barclays gave AMD stock a price target of $115, which caused an 8% decline last Thursday.

Advanced Micro Devices stock (AMD) has opened on Monday up 1.6% after announcing the $1.9 billion acquisition of distributed services cloud platform Pensando. Pensando’s software is already operational in the cloud setups of heavyweights like Goldman Sachs and is utilized by major cloud operators like IBM Cloud, Microsoft Azure and Oracle Cloud. AMD says the acquisition will bring it closer to its data centre and cloud enterprise partners.

Advanced Micro Devices Stock News: A new acquisition

In the press release, AMD says that Pensando’s technology offers a “fully programmable packet processor and comprehensive software stack that accelerate networking, security, storage and other services for cloud, enterprise and edge applications.

“To build a leading-edge data center with the best performance, security, flexibility and lowest total cost of ownership requires a wide range of compute engines,” said CEO and chairwoman Lisa Su. “All major cloud and OEM customers have adopted EPYC processors to power their data center offerings. Today with our acquisition of Pensando, we add a leading distributed services platform to our high-performance CPU, GPU, FPGA and adaptive SoC portfolio. The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level which expands our ability to offer leadership solutions for our cloud, enterprise and edge customers.”

Though AMD’s share price is elevated on Monday, it does not appear that the market is that euphoric about the new acquisition. AMD just finished finalizing the Xilinx deal, which was much larger, earlier this year. Investors may dislike the heavy focus on buying growth. The deal is expected to close sometime in the second quarter. 

AMD remains below $110 still after Barclays downgraded the chip maker last Thursday. Barclays marked AMD down to “equal weight” from a previous “overweight” rating. Additionally, its price target was trimmed from $148 to $115. The investment banks said demand for products in the gaming, personal computer and Xilinx segments would dry up in 2023 due to the business cycle.

AMD key statistics

Market Cap $178 billion
Price/Earnings 41
Price/Sales 8
Price/Book 19
Enterprise Value $175 billion
Operating Margin 22%
Profit Margin

19%

52-week high $164.46
52-week low $72.50
Short Interest 6%
Average Wall Street Rating and Price Target Buy, $153.59

Advanced Micro Devices Stock Forecast: A deal with little bounce

The market does not seem to care much about the Pensando acquisition. A nearly $2 billion takeover cannot seem to help AMD advance even 2%. At the time of writing, shares are treading water up 0.6%. AMD stock advanced to $110 at the open but quickly dropped to $108.50. Subsequently over the first 40 minutes, AMD shares have seen a steady rash of lower 5-minute candles. It would seem that the market wants to find some dose of support before any advance. The top trend line of the descending price channel that lasted for more than six months, and which AMD stock broke out of on March 16, may act as support near $107. AMD needs to break above $112.50 to regain a neutral outlook.

AMD 5-minute chart