The shares of Advanced Micro Devices (AMD) are rallying after BMO Capital upgraded the stock to Outperform from Market Perform, saying that the company should benefit from improved execution and the strength of its newer products.

BETTER EXECUTION UNDER NEW CEO: AMD's new CEO, Lisa Su, has made AMD's execution more consistent, and she has shown that she can make its performance more consistent as well, wrote BMO Capital analyst Ambrish Srivastava. Su also can enable AMD to exploit opportunities in large markets that it has not yet meaningfully entered, the analyst contended.

PRODUCTS: AMD can sell many more graphic processing units for use in high-end gaming and data centers, Srivastava wrote. Moreover, the company can obtain more revenue from the server market, the analyst believes. AMD's Vega product for high-end gaming and its new Zen architecture for high-end desktops and servers, along with its improved execution, could enable it to significantly increase its penetration of the high end gaming, data center and servers markets, according to Srivastava.

BMO TARGET: The analyst thinks that the company's EPS can reach 77c in 2018 and $1.33 over the longer term. Srivastava raised the price target on AMD to $15 from $6.

MERRILL DOUBLE-UPGRADES AMD: BMO's upgrade follows one last week from Bank of America Merrill Lynch analyst Vivek Arya, who double upgraded the stock two notches to Buy from Underperform, arguing that the chipmaker is "the only vendor that can challenge" both Intel (INTC) in PCs and servers, and NVIDIA (NVDA) in graphics and machine learning. AMD is standing in front of a $50B duopolistic addressable opportunity and holds less than 5% value share, Arya said, adding that "any success" would be highly accretive to the company's operating model. Arya noted that Wall Street remains largely sidelined on the stock with just 25% of research firms holding Buy ratings; the meager expectations "should create substantial potential for EPS revisions," he argued. Net-net, AMD's growth options are simply "too large to ignore," leading Arya to set a $12 price objective on the shares.

PRICE ACTION: In early trading, AMD rose 4.5% to $10.82. The stock earlier in the day set a new 52-week high of $10.93.