Technology

How Analysts View AMD After Earnings

Chris Lange

Published: January 30, 2019 1:15 pm

Last Updated: January 31, 2020 1:16 am

Advanced Micro Devices Inc. (NYSE: AMD) reported fourth-quarter and full-year 2018 earnings after markets closed Tuesday. Investors probably are breathing a small sigh of relief over these numbers after Monday’s warning from Nvidia. AMD earnings came in at expectations but revenues were low, and that sent shivers up and down the spines of investors. Analysts seemed to hold their ground on AMD for the most part.

24/7 Wall St. has included some brief highlights from the earnings report, as well as what analysts are saying about AMD after the fact.

For the quarter, the chipmaker posted earnings per share (EPS) of $0.08 on revenues of $1.42 billion. In the same period a year ago, the company reported EPS of $0.08 on revenues of $1.48 billion. Fourth-quarter results also compare to the consensus estimate for EPS of $0.08 per share on $1.45 billion in revenues.

The weakness came in the forecast. AMD expects revenue to be lower, year-over-year, in the first quarter of fiscal 2019. Revenue is forecast in a range of $750 million to $1.75 billion, down 12% sequentially and 24% year over year at the midpoint. For the full year, AMD expects revenue growth in the high single digits and non-GAAP gross margin of more than 41%. That’s the good news — gross margin was 39% in 2018 and 34% in 2017.

Analysts had forecast first-quarter earnings at $0.08 per share and revenues at $1.48 billion. For the full year, revenues were seen at $6.9 billion (about 6.5% higher than 2018 revenues) and EPS at $0.62.

Merrill Lynch reiterated a Buy rating with a $27 price objective. The firm gave its investment rationale as follows:

We rate AMD Buy since we view it as the only company that can challenge two large incumbents Intel and NVIDIA in a +$50 billion addressable market opportunity in PC, server, high-end gaming, deeplearning and related markets where AMD has less than 10% value share currently. Second, the company’s model allows for semi-custom product and licensing options with potential customers, which would create further leverage in the model.

Credit Suisse maintained a Neutral rating with a $13.50 price target. The firm noted that it was a bit perplexed by management’s optically aggressive calendar 2019 revenue guide, as it is somewhat uncharacteristic — and the firm suspects it’s supporting the OpEx growth needed to compete.

Other analyst calls were seen as follows:

• S&P Global downgraded it to Hold from Buy and lowered its price target to $22 from $25.
• Cowen has an Outperform rating but raised its price target to $28 from $26.
• JPMorgan raised its price target to $20 from $18.
• Morgan Stanley reiterated an Underweight rating.
• Morningstar has a Sell rating with an $11 price target.

Shares of AMD were last seen up about 15% at $22.15 on Wednesday, in a 52-week range of $9.04 to $34.14. The consensus price target is $23.66.