Source: CNBC by Samantha Subin

Stifel said there’s more room to run for Advanced Micro Devices even as the chip market faces ongoing supply chain disruptions and pockets of consumer weakness.

Analyst Ruben Roy initiated coverage of the chip stock with a buy rating, saying in a note to clients Wednesday that he expects AMD to expand profitability and deliver strong growth as it boosts market share in areas within its expanding IP portfolio.

“Current valuation appears reasonable to us at less than 20x forward-year EPS,” he said. “Despite near-term demand volatility, we expect share gains to drive growth well above market, and we expect gross and operating margin expansion to continue, which ultimately, should drive multiple expansion, in our view.”

Shares of AMD have come under pressure this year, falling nearly 45% amid a weakening backdrop for chip stocks. That said, the firm’s new $122 price target suggests shares could rally more than 53% from Wednesday’s close.

“Looking ahead, we believe that AMD’s expanded IP portfolio and the ability to offer platform solutions will likely emerge as a competitive advantage,” Lee said. “From a near-term perspective, while fears of a potential peak in PC market momentum are likely to continue, we believe that recent share price weakness reflects those concerns.”