Advanced Micro Devices, Inc. (NASDAQ: AMD)'s strong earnings beat and encouraging guidance wasn't sufficient for analysts at Citi to change their bearish view. Analyst Christopher Danely maintains a Sell rating on AMD's stock with a price target boosted from $4 to $5, which still implies downside of more than 60 percent from current levels.

Despite an encouraging report, the fact remains AMD's stock is trading close to its all-time high on a valuation basis at 2.8x 2018E sales, Danely stated in a research report. Since the company is still losing money and market share in its core PC processor/graphics segment, a more appropriate valuation is 1.0x sales.

What About Crypto Currency Mining?

One of the bullish cases for owning AMD's stock is the surge in demand for the company's graphic cards used specifically for mining crypto currencies. For example, many people who mine the Ethereum cryptocurrency prefer AMD's $200-$300 video cards as it's the most economical tool but this market is unsustainable.

AMD's management cited miners as a notable driver of GPU sales and sees the segment as being a large opportunity. The analyst disagrees and thinks the "Ethereum mining related GPU gold rush is over" after the digital currency saw a 50 percent collapse in its price from the June highs. Also, mining Ethereum is more difficult today than it was just a few months ago.

"For these reasons we do not believe that the crypto currency related GPU sales are sustainable and we expect miners to recover a good portion of their hardware investment by reselling their graphics cards on the secondary market, causing a headwind for retail channel GPU sales," Danely stated.

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