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Wall Street Analysts React to AMD's Impressive Earnings Report
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Shares of Advanced Micro Devices (AMD - Free Report) opened more than 12% higher today after the company impressed investors with its latest quarterly earnings report on Wednesday afternoon, quelling fears that weaker demand from cryptocurrency miners and industry-wide cyclical trends would drag the trendy stock lower.
For the first quarter of fiscal 2018, AMD reported adjusted earnings of 11 cents per share, beating the Zacks Consensus Estimate of 9 cents. Total revenue came in at $1.65 billion, surpassing our consensus estimate by about $100 million and improving 40% year over year.
AMD cited strong performance in its Computing and Graphics segment for the impressive quarter, with segment revenue of $1.12 billion marking growth of roughly 95% from the year-ago period. Operating income in the segment was $138 million, up from an operating loss of $21 million last year (also read: AMD Stock Surges on Earnings Beat, Strong Revenue Guidance).
“The first quarter was an outstanding start to 2018 with 40 percent year-over-year revenue growth,” said CEO Dr. Lisa Su. “PC, gaming and datacenter adoption of our new, high-performance products continues to accelerate. We are excited about our long-term roadmaps and focused on delivering sustained revenue growth and profitability.”
AMD also said that it expects Q2 revenue to fall in the range of $1.675 billion to $1.775 billion, outpacing our most recent consensus estimate of $1.58 billion.
Heading into the report, investors and analysts were concerned that weakness in the cryptocurrency market could lead to headwinds for AMD, which had benefitted from rising demand among digital coin miners that use its GPUs in high-end mining rigs.
The company’s strong results and healthy guidance likely quashed those fears for many, but AMD remains a polarizing stock on Wall Street. Let’s take a closer look at what the market’s top analysts are saying in the wake of the report.
Analysts React
Interestingly enough, several major analysts took a cautious tone when reflecting on AMD’s report. For example, a team from Oppenheimer called the latest numbers a solid result but expressed concern that AMD will be able to compete against its rivals in the future.
“Staring down more established competitors with larger R&D budgets, we believe high-end share gains against [Intel (INTC - Free Report) / Nvidia (NVDA - Free Report) ] will prove challenging, keeping us sidelined here,” wrote Oppenheimer analyst Rick Schafer in a note to clients.
Oppenheimer currently gives AMD a “Perform” rating, and although the company did not necessarily cite issues in these areas, the firm believes that cryptocurrency mining and slower server market share gains are still risks.
Similarly, Bernstein analyst Stacy Rasgon reiterated a “Market Perform” rating and $13 price target for AMD on Thursday morning. Rasgon argued that one of the keys to AMD’s report was its full-year gross margin guidance, which gained 1% and now sits above 37%. The analyst said that higher margin guidance and product traction could mean that AMD has reached an inflection point.
“While the company appears to be suggesting that crypto is a relatively minor contributor to revenues, as well as guiding for a ‘soft landing’ (with Ryzen/EPYC ramps more than offsetting declines), there may still be a bit of risk if their estimate of exposure (which at several hundred million dollars feels a little light) is wrong,” Rasgon wrote.
KeyBanc Capital Markets was another firm with a lukewarm reaction to AMD’s earnings report, maintaining its “Sector Weight” rating for the chip maker today. The firm mentioned that blockchain accounted for an estimated 10% of revenue in the quarter and acknowledged that strong Ryzen and semi-custom sales successfully offset slightly weaker mining demand.
Led by analysts Michael McConnell and James Wang, KeyBanc suggested that “evidence of EPYC server processor design win traction will be required” for AMD to outperform the sector going forward.
Still, despite this cautious tone, KeyBanc said that AMD’s strong guidance prompted higher estimates, which should become a trend soon. AMD is currently sporting a Zacks Rank #3 (Hold), but as earnings estimate revisions start to pour in, that ranking could change soon.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
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Wall Street Analysts React to AMD's Impressive Earnings Report
Shares of Advanced Micro Devices (AMD - Free Report) opened more than 12% higher today after the company impressed investors with its latest quarterly earnings report on Wednesday afternoon, quelling fears that weaker demand from cryptocurrency miners and industry-wide cyclical trends would drag the trendy stock lower.
For the first quarter of fiscal 2018, AMD reported adjusted earnings of 11 cents per share, beating the Zacks Consensus Estimate of 9 cents. Total revenue came in at $1.65 billion, surpassing our consensus estimate by about $100 million and improving 40% year over year.
AMD cited strong performance in its Computing and Graphics segment for the impressive quarter, with segment revenue of $1.12 billion marking growth of roughly 95% from the year-ago period. Operating income in the segment was $138 million, up from an operating loss of $21 million last year (also read: AMD Stock Surges on Earnings Beat, Strong Revenue Guidance).
“The first quarter was an outstanding start to 2018 with 40 percent year-over-year revenue growth,” said CEO Dr. Lisa Su. “PC, gaming and datacenter adoption of our new, high-performance products continues to accelerate. We are excited about our long-term roadmaps and focused on delivering sustained revenue growth and profitability.”
AMD also said that it expects Q2 revenue to fall in the range of $1.675 billion to $1.775 billion, outpacing our most recent consensus estimate of $1.58 billion.
Heading into the report, investors and analysts were concerned that weakness in the cryptocurrency market could lead to headwinds for AMD, which had benefitted from rising demand among digital coin miners that use its GPUs in high-end mining rigs.
The company’s strong results and healthy guidance likely quashed those fears for many, but AMD remains a polarizing stock on Wall Street. Let’s take a closer look at what the market’s top analysts are saying in the wake of the report.
Analysts React
Interestingly enough, several major analysts took a cautious tone when reflecting on AMD’s report. For example, a team from Oppenheimer called the latest numbers a solid result but expressed concern that AMD will be able to compete against its rivals in the future.
“Staring down more established competitors with larger R&D budgets, we believe high-end share gains against [Intel (INTC - Free Report) / Nvidia (NVDA - Free Report) ] will prove challenging, keeping us sidelined here,” wrote Oppenheimer analyst Rick Schafer in a note to clients.
Oppenheimer currently gives AMD a “Perform” rating, and although the company did not necessarily cite issues in these areas, the firm believes that cryptocurrency mining and slower server market share gains are still risks.
Similarly, Bernstein analyst Stacy Rasgon reiterated a “Market Perform” rating and $13 price target for AMD on Thursday morning. Rasgon argued that one of the keys to AMD’s report was its full-year gross margin guidance, which gained 1% and now sits above 37%. The analyst said that higher margin guidance and product traction could mean that AMD has reached an inflection point.
“While the company appears to be suggesting that crypto is a relatively minor contributor to revenues, as well as guiding for a ‘soft landing’ (with Ryzen/EPYC ramps more than offsetting declines), there may still be a bit of risk if their estimate of exposure (which at several hundred million dollars feels a little light) is wrong,” Rasgon wrote.
KeyBanc Capital Markets was another firm with a lukewarm reaction to AMD’s earnings report, maintaining its “Sector Weight” rating for the chip maker today. The firm mentioned that blockchain accounted for an estimated 10% of revenue in the quarter and acknowledged that strong Ryzen and semi-custom sales successfully offset slightly weaker mining demand.
Led by analysts Michael McConnell and James Wang, KeyBanc suggested that “evidence of EPYC server processor design win traction will be required” for AMD to outperform the sector going forward.
Still, despite this cautious tone, KeyBanc said that AMD’s strong guidance prompted higher estimates, which should become a trend soon. AMD is currently sporting a Zacks Rank #3 (Hold), but as earnings estimate revisions start to pour in, that ranking could change soon.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>