Bank of America analyst Vivek Arya has reiterated a Buy rating on AMD (NASDAQ:) ahead of the company’s earnings report in early May.

According to Arya, Q1 sales are expected to be $5.5 billion. Q2 guidance is $6.4 billion. The integration of Xilinx will drive this growth. Arya believes AMD will continue to grow organically at 31% with total sales of $24 billion, up 50% from the current consensus.

“While AMD also faces a ~3% (or $800mn) topline headwind/9c (or 2%) EPS headwind on PC softness, we think it could be offset by stronger laptop pricing (enterprise mix-shift), game console channel rebuild, server strength, and Xilinx upside (pricing, Altera share gains) driving total to unchanged $25bn in sales/>$4 in EPS. Note, bulk of PC downside is in low-end Chromebooks where AMD did not participate, nor was it exposed to Apple’s (NASDAQ:) internal silicon switch,” Arya said in a client note.

The analyst is especially positive on valuation, which now trades at 21x PE “well below our 30%+ CY21-24 pf-EPS growth-rate.”

Arya on the contrary is bullish on Intel (NASDAQ 🙂 because of rising strategic and financial headwinds. Analyst calls for $0.81 EPS on $18.1 Billion in sales, which is lower than the consensus $0.80 per $18.3B revenue.

The analyst also sees the possibility of guidance missing – $18 Billion vs $18.5 Billion consensus, CY22 sales between $74 and $76 billion. This is lower than $75.4 billion.

“We see modest 2-3% impact to CY22 on PC headwinds and believe this sort of “benign” INTC report would be positive for semis, especially AMD. Conversely, a >$3bn cut to CY22 sales (barring share shifts) could be perceived as bigger negative for semis/semicaps given INTC’s broad incumbency,” Arya added.

By Senad Karaahmetovic