We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Advanced Micro (AMD) Up 1.1% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for Advanced Micro Devices (AMD - Free Report) . Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Advanced Micro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AMD Q2 Earnings In Line, Revenues Beat Estimates
AMD reported second-quarter 2019 non-GAAP earnings of 8 cents per share, which matched the Zacks Consensus Estimate. However, the figure declined 42.9% year over year.
Revenues of $1.531 billion beat the Zacks Consensus Estimate of $1.524 billion. However, the top line declined 13% year over year.
The year-over-year decline can be attributed to weak Computing and Graphics segment and semi-custom revenues.
Segmental Details
Computing and Graphics segment (61.4% of total revenues) revenues decreased 13% year over year and came in at $940 million.
The year-over-year decline can be attributed to lower graphics channel sales, partially offset by higher client processor sales.
Revenues from Mobile client processor grew double-digit on a year-over-year, primarily on account of higher unit shipments during the reported quarter.
AMD stated that Ryzen and EPYC processors and data center GPU revenues double-digit percentage on a year-over-year basis. The increase was primarily owing to higher channel sales of RX 500 series GPUs and the launch of the latest Radeon 5700 family.
Client processor average selling price (ASP) improved year over year, driven by higher Ryzen processor sales. Client ASP was down on a sequential basis owing to higher mix of mobile processor ASP.
GPU ASP increased year over year, primarily driven by higher datacenter GPU sales.
AMD recently introduced promising features for gamers in computing, PC gaming and visualization technologies based on its new Radeon RX 5700 graphics card and third generation AMD Ryzen desktop processor.
Reportedly, AMD slashed prices of RX 5700 XT and RX 5700 by $50 and $30, respectively, to sustain its competitive edge in discrete GPU market against NVIDIA.
The company also announced the much-awaited third generation AMD Ryzen desktop processor. In a bid to deliver an enhanced gaming experience, AMD Ryzen Threadripper 7 3700X offers almost 30% greater multi-threaded performance compared with Intel Core i7-9700K.
Further, the company introduced its first 7-nanometer Navi gaming GPUs. Moreover, AMD is on track to begin Rome production shipments in the second quarter to support a third-quarter launch.
During the second quarter, AMD announced that its latest Radeon Pro Vega II GPUs will support Apple’s new Mac Pro.
Moreover, AMD recently entered into strategic partnership with Samsung Electronics Co., Ltd. with an aim to bring immersive graphics experience to smartphone users. Per the terms of the multi-year agreement, AMD’s high performance Radeon graphics solutions and technologies will be integrated with Samsung’s SoCs to enhance mobile applications.
AMD also rolled out the latest Xbox Game Pass to PC gamers, by which the players will be able to access more than 100 PC games for three-months with the purchases of selected products of AMD. We believe the extension of Xbox Game Pass to PCs will enable AMD to reinforce its competitive position against Microsoft.
Enterprise, Embedded and Semi-Custom segment (38.6% of total revenues) revenues of $591 million were down 12% year over year.
The year-over-year decline can primarily be attributed to lower semi-custom product revenues, partially mitigated by higher EPYC processor and server sales.
During the quarter under review, Amazon’s cloud arm, Amazon Web Services (AWS), announced broader availability of the AMD EPYC processor-based service. AWS launched three new EPYC processor-powered EC2 instance families, including the first T3-series instances.
Moreover, Sony’s upcoming gaming console will be powered by a custom AMD chip based on the “Zen 2” CPU and “Navi” GPU architectures.
Operating Details
Non-GAAP gross margin expanded 400 bps on a year-over-year basis to 41%, driven by strong Ryzen and EPYC processors and datacenter GPU sales.
Operating expenses on a non-GAAP basis increased 9.6% year over year to $512 million. Research & development (R&D) expenses improved 4.5% year over year to $373 million. Marketing, general and administrative expenses surged 33.1% year over year to $189 million.
Adjusted EBITDA decreased 28.5% year over year to $163 million.
Non-GAAP operating income came in at $111 million, down 40.3% year over year. The year-over-year decline was primarily owing to lower revenues and operating margin in the Computing and Graphics segment.
Segment wise, Computing and Graphics operating income plunged 81.2% year over year to $22 million.
Enterprise, Embedded and Semi-Custom operating income was $89 million compared with a profit of $69 million reported in the year-ago quarter.
The improvements were primarily driven by higher EPYC processor sales.
Balance Sheet & Cash Flow
AMD ended the second quarter with cash and cash equivalents (including marketable securities) of $1.13 billion compared with $1.19 billion in the previous quarter.
Total debt (including current portion) was $1.03 billion, down from $1.09 billion reported at the end of the previous quarter.
Free cash outflow was $28 million compared with free cash flow of $275 million in the previous quarter.
Guidance
For third-quarter 2019, AMD expects revenues to be roughly $1.8 billion (+/-$50 million), up almost 18% sequentially and 9% year over year.
Management expects robust sales from Ryzen, EPYC and Radeon products to drive year-over-year and sequential revenue growth.
Non-GAAP gross margin is anticipated to be 431%. Operating expenses are anticipated to be roughly $525 million.
For 2019, AMD expects revenues to increase mid-single digit on a year-over-year basis, primarily drive by higher sales from the latest Ryzen, EPYC and Radeon processors, partially offset by lower semi-custom revenues.
Non-GAAP gross margin is anticipated to be more than 42%
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.13% due to these changes.
VGM Scores
At this time, Advanced Micro has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Advanced Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Advanced Micro (AMD) Up 1.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Advanced Micro Devices (AMD - Free Report) . Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Advanced Micro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AMD Q2 Earnings In Line, Revenues Beat Estimates
AMD reported second-quarter 2019 non-GAAP earnings of 8 cents per share, which matched the Zacks Consensus Estimate. However, the figure declined 42.9% year over year.
Revenues of $1.531 billion beat the Zacks Consensus Estimate of $1.524 billion. However, the top line declined 13% year over year.
The year-over-year decline can be attributed to weak Computing and Graphics segment and semi-custom revenues.
Segmental Details
Computing and Graphics segment (61.4% of total revenues) revenues decreased 13% year over year and came in at $940 million.
The year-over-year decline can be attributed to lower graphics channel sales, partially offset by higher client processor sales.
Revenues from Mobile client processor grew double-digit on a year-over-year, primarily on account of higher unit shipments during the reported quarter.
AMD stated that Ryzen and EPYC processors and data center GPU revenues double-digit percentage on a year-over-year basis. The increase was primarily owing to higher channel sales of RX 500 series GPUs and the launch of the latest Radeon 5700 family.
Client processor average selling price (ASP) improved year over year, driven by higher Ryzen processor sales. Client ASP was down on a sequential basis owing to higher mix of mobile processor ASP.
GPU ASP increased year over year, primarily driven by higher datacenter GPU sales.
AMD recently introduced promising features for gamers in computing, PC gaming and visualization technologies based on its new Radeon RX 5700 graphics card and third generation AMD Ryzen desktop processor.
Reportedly, AMD slashed prices of RX 5700 XT and RX 5700 by $50 and $30, respectively, to sustain its competitive edge in discrete GPU market against NVIDIA.
The company also announced the much-awaited third generation AMD Ryzen desktop processor. In a bid to deliver an enhanced gaming experience, AMD Ryzen Threadripper 7 3700X offers almost 30% greater multi-threaded performance compared with Intel Core i7-9700K.
Further, the company introduced its first 7-nanometer Navi gaming GPUs. Moreover, AMD is on track to begin Rome production shipments in the second quarter to support a third-quarter launch.
During the second quarter, AMD announced that its latest Radeon Pro Vega II GPUs will support Apple’s new Mac Pro.
Moreover, AMD recently entered into strategic partnership with Samsung Electronics Co., Ltd. with an aim to bring immersive graphics experience to smartphone users. Per the terms of the multi-year agreement, AMD’s high performance Radeon graphics solutions and technologies will be integrated with Samsung’s SoCs to enhance mobile applications.
AMD also rolled out the latest Xbox Game Pass to PC gamers, by which the players will be able to access more than 100 PC games for three-months with the purchases of selected products of AMD. We believe the extension of Xbox Game Pass to PCs will enable AMD to reinforce its competitive position against Microsoft.
Enterprise, Embedded and Semi-Custom segment (38.6% of total revenues) revenues of $591 million were down 12% year over year.
The year-over-year decline can primarily be attributed to lower semi-custom product revenues, partially mitigated by higher EPYC processor and server sales.
During the quarter under review, Amazon’s cloud arm, Amazon Web Services (AWS), announced broader availability of the AMD EPYC processor-based service. AWS launched three new EPYC processor-powered EC2 instance families, including the first T3-series instances.
Moreover, Sony’s upcoming gaming console will be powered by a custom AMD chip based on the “Zen 2” CPU and “Navi” GPU architectures.
Operating Details
Non-GAAP gross margin expanded 400 bps on a year-over-year basis to 41%, driven by strong Ryzen and EPYC processors and datacenter GPU sales.
Operating expenses on a non-GAAP basis increased 9.6% year over year to $512 million. Research & development (R&D) expenses improved 4.5% year over year to $373 million. Marketing, general and administrative expenses surged 33.1% year over year to $189 million.
Adjusted EBITDA decreased 28.5% year over year to $163 million.
Non-GAAP operating income came in at $111 million, down 40.3% year over year. The year-over-year decline was primarily owing to lower revenues and operating margin in the Computing and Graphics segment.
Segment wise, Computing and Graphics operating income plunged 81.2% year over year to $22 million.
Enterprise, Embedded and Semi-Custom operating income was $89 million compared with a profit of $69 million reported in the year-ago quarter.
The improvements were primarily driven by higher EPYC processor sales.
Balance Sheet & Cash Flow
AMD ended the second quarter with cash and cash equivalents (including marketable securities) of $1.13 billion compared with $1.19 billion in the previous quarter.
Total debt (including current portion) was $1.03 billion, down from $1.09 billion reported at the end of the previous quarter.
Free cash outflow was $28 million compared with free cash flow of $275 million in the previous quarter.
Guidance
For third-quarter 2019, AMD expects revenues to be roughly $1.8 billion (+/-$50 million), up almost 18% sequentially and 9% year over year.
Management expects robust sales from Ryzen, EPYC and Radeon products to drive year-over-year and sequential revenue growth.
Non-GAAP gross margin is anticipated to be 431%. Operating expenses are anticipated to be roughly $525 million.
For 2019, AMD expects revenues to increase mid-single digit on a year-over-year basis, primarily drive by higher sales from the latest Ryzen, EPYC and Radeon processors, partially offset by lower semi-custom revenues.
Non-GAAP gross margin is anticipated to be more than 42%
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.13% due to these changes.
VGM Scores
At this time, Advanced Micro has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Advanced Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.