'The crypto-GPU hangover continued': Here's what Wall Street is saying about AMD earnings

  • AMD on Tuesday announced in line fourth-quarter results and guided for a weaker first quarter.
  • The company said it expects full-year 2019 revenue to grow by a high single-digit percentage.
  • Wall Street sees the revenue miss as no surprise, and has mixed opinions on whether its coming 7-nanometre central processing unit can grab enough market share from Intel.
  • Watch AMD trade live.

AMD on Tuesday announced in line fourth-quarter results and guided for a weaker first quarter.

The chipmaker said it earned $US0.08 a share, matching the Wall Street consensus. Its top line came in at $US1.42 billion, just missing the $US1.44 billion that analysts surveyed by Bloomberg were expecting.

Looking ahead, AMD said it sees its first-quarter revenue in the range of $US1.2 billion to $US1.3 billion, missing the $US1.47 billion that was anticipated. But the company said the upcoming rollout of its 7-nanometre products and strong sales from Ryzen, EPYC, and Radeon give it the confidence to guide its full-year 2019 revenue growth rate at a high single-digit percentage.

Analysts across Wall Street see the revenue miss as no surprise, especially after rival Nvidia cut its quarterly revenue guidance on Monday. The main debate is around AMD’s full-year guidance and whether its coming 7-nanometre central processing unit can grab enough market share from Intel.

Here’s what Wall Street analysts are saying about the quarter:


RBC Capital Markets

AMD

Rating: Outperform

Price target: $US34

“After expectations were taken down by the Nvidia pre- announcement, the lower than expected guidance was ‘baked into’ the stock price in our view,” said analyst Mitch Steves.

He added: “Importantly, when we look at the remainder of the print outside of the crypto revenue headwinds we see solid underlying trends: 1) we estimate server revenues were up over 600% y/ y at around $US120-130M, 2) computing results were also up sequentially and we estimate ~$US520M, 3) while graphics declined y/y, this was offset by a notable uptick in Data Center graphics sales which were likely up over 200% sequentially, and 4) semi-custom chips were lighter than we anticipated, declining ~50% sequentially according to our best estimate.”


Jefferies

YouTube/AMD

Rating: Buy

Price target: $US30

“AMD is ramping new, high-end GPUs and MPUs for PCs and datacenters with transistors smaller than its peers for the first time in recent history,” said Mark Lipacis. “We think it successfully gains share.”

Lipacis continued: “Bears argue that AMD cannot compete with Intel on a sustained basis, due to the difference in scale and resources. We think it is important to consider that as a fabless company, AMD is not working alone, it is working with TSMC which is doing the heavy lifting on developing the next process node. TSMC’s clients, like AAPL, XLNX and QCOM, are effectively funding development of the next manufacturing process node – so instead of thinking “INTC vs AMD,” we think it is more accurate to think it is ” INTC vs AMD+TSMC +AAPL+XLNX+NVDA.?”


Susquehanna International Group

YouTube/HardwareCanucks

Rating: Neutral

Price target: $US22 (from $US18)

“As previewed, AMD missed 1Q19 Street guidance significantly, as the crypto-GPU hangover continued,” said Christopher Rolland.

“We believe the debate around crypto inventories is now coming to a close. If AMD can grow >20% sequentially in the last three quarters of the year, we believe the stock should work higher from here and will look to verify this progress in our channel work this quarter.”


JPMorgan

Rating: Neutral

Price target: $US20 (from $US18)

“With limited upside to our price target, we remain Neutral AMD,” said Harlan Sur.

“We expect AMD to drive CPU revenue growth in 2019 for both client PC and server with our assumption of the company gaining modest market share in both segments, Looking beyond this year, we remain less certain on further share gains as we expect Intel to broaden its 10nm portfolio. Nevertheless, we believe AMD is executing well on its product roadmap and making progress toward its 2020 financial model.”


Morgan Stanley

Rating: Underweight

Price target: $US17

“While AMD had clearly signalled some 1q challenges, guidance was 15% below current consensus (and 21% below where consensus was before management had cautionary comments on 1q at a conference in December), but the company maintained high single digit growth for the year, which seems like a very high bar in light of those 1q challenges,” said Joseph Moore at Morgan Stanley.


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Photo by Ethan Miller/Getty Images

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