• Piper Sandler analyst Harsh Kumar downgraded Advanced Micro Devices Inc to Neutral from Overweight with a price target of $130, down from $140.
• The analyst is cautious on the broader automotive sector, saying the pace of orders and strong pricing "may come into question" as supply normalizes in the second half of 2022.
• The price target implies that the stock is fair-priced.
• Once supply and demand hit parity, it will likely result in a slower pace of orders than the pace seen over the last few years, Kumar notes.
• His downgrade of AMD reflects concerns about a slowdown in the PC market during 2022, the "earnings and growth headwind" from closing the Xilinx Inc deal, and the "broader market dynamics around high-multiple, high-growth technology stocks."
• As such, he feels there is more downside risk than upside risk at this point.
• Price Action: AMD shares traded lower by 1.52% at $126.32 in the premarket session on the last check Thursday.