Advanced Micro Devices, Inc. (NASDAQ: AMD) shares are spiking higher Monday thanks to an upbeat assessment from Macquarie Research.

The Analyst

Macquarie analyst Srini Pajjuri upgraded AMD from Underperform to Neutral and upped the price target from $10 to $11.

The Thesis

AMD shares have underperformed the Philadelphia Semiconductor Index by more than 45 points, Pajjuri said in a note.

Notwithstanding improved expectations, AMD's revenue and margin performance isn't enough to justify lofty expectations, the analyst said.

Macquarie projects only moderate share gains in the PC and GPU markets and some headwinds in the cryptocurrency market. AMD is expected to benefit from improving product mix and its recent Intel Corporation (NASDAQ: INTC) GPU partnership, Pajjuri said.

ASPs could improve, as Ryzen CPU becomes a larger portion of the mix, the analyst said. In GPUs, Polaris helped increased share gains over the past few quarters and the Vega ramp is helping ASPs, Pajjuri said. The analyst forecasts ASP tailwinds in GPUs, driven by the Apple Inc. (NASDAQ: AAPL) iMac Pro win and Intel partnership.

"Overall, we believe PC/GPU revenue can grow at a high-single digit pace in 2018 despite potential crypto-related headwinds," Pajjuri said.

Macquarie said it's encouraged by server wins at HP Inc (NYSE: HPQ), Microsoft Corporation (NASDAQ: MSFT) and Baidu Inc (ADR) (NASDAQ: BIDU), increasing its confidence in AMD's EPYC server processor.

The firm estimates that AMD could command a 5-10 percent unit share in the server processor market in the next one to two years. There is solid strategic value in AMD's IP and products, given its large addressable markets, Pajjuri said.

Macquarie said AMD, trading at 24 times calendar year 2019 PE, is not inexpensive but trades at over a 30-percent discount to Intel on an EV/S basis.

The Price Action

AMD shares were down 9.26 percent from the start of the year until Dec. 15. The upgrade has served to trim some of the losses.

At the time of writing, the shares were jumping 6.22 percent to $10.93

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