Piper Sandler downgraded this semiconductor giant on Thursday

Advanced Micro Devices Inc (NASDAQ: AMD) slid more than 3.0% from its intraday high on Thursday after Piper Sandler downgraded the stock to “neutral” citing several headwinds in 2022.

Kumar defends his bearish call on CNBC’s ‘TechCheck’

On CNBC’s “TechCheck”, Piper Sandler’s Harsh Kumar agreed that the enterprise side of AMD’s personal computers business continues to be strong, but the retail side, he added, looks nervous.

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The bulk of AMD’s revenue comes from retail PCs, and that’s what we’re concerned about. The reality is, a lot of folks upgraded their laptops at home during the pandemic. But we saw some numbers in the fourth quarter where PC sales declined, and that could be one issue for AMD.

Kumar also slashed his price target on the semiconductor stock from $140 to $130, only 2.0% above its current share price. Mad Money host Jim Cramer, however, disagrees with his dovish outlook on AMD.

Other reasons why Kumar dislikes AMD

In October, AMD said it will buy Xilinx for $35 billion – an acquisition that Kumar says could be another challenging backdrop for the chipmaker this year. He added:

AMD is expected to grow 60% in 2021. That number is likely to be 24% in 2022. Xilinx is growing at about 10% top line. So, when the acquisition closes, you are going to see the combined company slow down AMD’s growth rate quite a bit.

The American multinational is currently trading at a price-to-earnings ratio of 40, which, as per Kumar, could be expensive for investors at a time when they’re rotating out of high valuation names on fears of inflation and aggressive rate hikes.  

A day earlier, Citi’s Chris Danley said Micron Technology Inc was his top semiconductor pick for 2022.