Does AMD Have 'Unrecognized Value'? This Northland Analyst Thinks So

In a report published Tuesday, Northland Securities analyst Gus Richard initiated coverage of Advanced Micro Devices, Inc (NASDAQ: AMD) with an Outperform rating and a price target of $5.

Advanced Micro develops micro processors and other related technologies for consumers and businesses.

In the report Northland Securities noted, "Investors have decided that AMD has hit the iceberg and they are waiting for the ship to sink. However, we believe that AMD still has time to avoid the collision, and if all else fails investors will be bailed out by the lifeboat of M&A."

Although the company is far behind Intel Corporation (NASDAQ: INTC), it is taking steps to narrow the gap over the next couple of years. "We believe that AMD has a strong design team working on the new Zen process core due out next year. We believe that this will be a significant improvement over its current product offering, and may enable AMD to once again be a viable second source to INTC in the data center," analyst Gus Richard mentioned.

"We expect a seasonal bounce in 2H15 in AMD's core gaming business and to a lesser extent their PC business. In CY16 AMD will launch its Zen processor that is built in a 14nm FinFet process that will likely be a significant improvement over its current 28nm products and provide a significant narrowing of the performance gap with Intel," Richard added.

Advanced Micro's x86 is expected to continue dominating the server market. The company is also taking steps to reduce its operating expenses, besides refocusing its R& D efforts.