Advanced Micro Devices, Inc. (NASDAQ: AMD) is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles.
The company recently announced financial results and business progress for the 1st quarter. AMD, reported ($0.04) EPS for the quarter, meeting consensus estimates of ($0.04). The company reported revenue of $984 million during the quarter. During the same period in the prior year, the firm earned ($0.12) earnings per share. The revenues for the quarter were up 18.3% compared to the same quarter last year.
For the second quarter of 2017, AMD expects revenue to increase approximately 17 percent sequentially, plus or minus 3 percent. The midpoint of guidance would result in second quarter 2017 revenue increasing approximately 12 percent year-over-year. On the margin front, the company is expecting gross margin to be approximately 33%, lower than in the 1st quarter. The company continues to announce muted guidance, even after the launch of high yielding new products under its franchise.
While earnings and revenue of the company were largely in line with expectations, the company’s future guidance came up short of what investors were expecting. As a result, on May 2nd, the company’s stock crashed by more than 24.2%, loosing around $3 billion market capitalization.
Notwithstanding the muted results, the core fundamentals (over the longer term) of the company continue to remain stable and therefore the management can still put up a brave face. As per the company, AMD is well positioned for solid revenue growth and margin expansion opportunities across the business in the year ahead as it brings innovation, performance, and choice to an expanding set of markets.
Considering recent corrections, AMD is presently ahead of the pack, among other semiconductor & chip stocks. Moreover, modest expectations coupled with reduced valuations, has further de-risked the risk reward situation for the company.
Additionally, with a series of new launches, AMD stock could move to a growth trajectory. Vega, Project Scorpio, Ryzen 3, Naples, and the upcoming APU products launch could put the company in a relatively better position than its current state. Also, the company is set for a public announcement during May 2017 and any positive announcement about its product and technological initiatives could drive the stock price.
With the recent developments, analyst have revised their outlook on the stocks:
Firm: Rating: Price: Date:
Vetr BUY $15.16 February 6, 2017
Goldman Sachs SELL $11.00 April 6, 2017
Macquarie Underperform $10.00 May 2, 2017
The stock currently has an average rating of “Hold” and a consensus price target of $12.00.
About the Company: AMD is engaged in high-performance computing, graphics, and visualization technologies — the building blocks for gaming, immersive platforms, and the datacenter. With hundreds of millions of consumers, leading Fortune 500 businesses, and innovative scientific research facilities around the world rely on AMD technology. The company was founded by W. J. Sanders III and David John Carey on May 1, 1969 and is headquartered in Sunnyvale, CA.
Major divisions of the company: AMD operates through the following segments: Computing and Graphics, and Enterprise, Embedded and Semi-Custom. The Computing and Graphics segment includes desktop, notebook processors, chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties.
Critical analysis of management’ guidance: Over the past few quarters, the company’s profitability slowed down from what it was expected to be. More importantly, despite the launch of new products and better product mix; AMD’s profitability story remains constrained. Analyst’ expected relatively higher yields from the company due to Ryzen CPU which was launched at the beginning of March along with initial shipments of Vega GPUs. Also, Naples, the high-performance x86 server CPU, is due to be launched in the second quarter. Overall, the introduction of these new products should have resulted into higher gross margin guidance.
The biggest worry ahead for the management, is with the firm appearing to be unable to scale up margins vis-a-vie its peers. AMD’s CPU competitor Intel and its GPU competitor NVIDIA have relatively higher gross margin. Even Micron that had a lower gross margin a year ago had been able to catch up with its recent quarter gross margin at 38.5%. This implies that as the firm sees competitive and pricing pressure, it has been unable to sell more value-added high yielding products and or control expenses.
Therefore, to get the profitability on track, AMD needs to articulate its strategy in a more nuanced way and drive it through the organization. A sharp focus on operational efficiencies will continue to remain a key challenge for the company and management’s ability to hold margins more successfully than its competitors will be a key monitorable.
The market for desktops and notebooks is expected to remain “flat” during 2017 as against 2016, which is an improvement from sharp declines in prior years. Overall, 2017 promises to be an exciting year for servers and the competitiveness of computer offerings.
AMD’s Ryzen CPU appears competitive and could drive 2Q share gains assuming a clean ramp. AMD’s Vega GPU appears on track for 2Q launch. Additionally, the server market is expected to grow at 10% Y/Y in 2017. AMD’s Naples is expected to gain market share in this segment. It said, NVDA continues to lead the market, with as many as 100 GPUs per full rack.
Q1 2017 Results
- Earnings: Revenue of $984 million was up 18 percent year-over-year, driven by higher revenue in the Computing and Graphics and Enterprise, Embedded, and Semi-Custom business segments. Revenue was down 11 percent sequentially, due primarily to seasonality in both segments.
- Profitability: On a GAAP basis, gross margin was 34 percent, up 2 percentage points year-over-year and sequentially due to a higher percentage of revenue from the Computing and Graphics segment, as well as a richer product mix within that segment. Operating loss of $29 million compared to operating losses of $68 million a year ago and $3 million in the prior quarter. Net loss of $73 million compared to net losses of $109 million a year ago and $51 million in the prior quarter. Loss per share of $0.08 compared to a loss per share of $0.14 a year ago and a loss per share of $0.06 in the prior quarter.
- Liquidity: Cash, cash equivalents, and marketable securities were $943 million at the end of the quarter, down $321 million from the end of the prior quarter primarily due to the timing of sales and cash collections, debt interest payments, and increased inventory.
Q1 2017 Highlights
- AMD launched its first high-performance x86 Ryzen desktop processor based on the entirely new “Zen” core microarchitecture, bringing leadership multi-core performance to PC gamers, creators, and hardware enthusiasts worldwide.
Upcoming products: AMD shared new details about its upcoming server and high-end graphics solutions:
- Launching in Q2 2017, AMD’s high-performancex86 server CPU, codenamed “Naples”, exceeds today’s top competitive offering on critical parameters, with 45 percent more cores, 60 percent more input / output capacity (I/O), and 122 percent more memory bandwidth. AMD also announced collaboration with Microsoft to incorporate the cloud delivery features of “Naples” with Microsoft’s “Project Olympus” server platform.
- AMD’s VEGA GPU architectureis on track to launch in Q2, and has been designed from scratch to address the most data, and visually-intensive next-generation workloads with key architecture advancements including: a differentiated memory subsystem, next-generation geometry pipeline, new compute engine, and a new pixel engine.
Excerpts of management guidance:
- Revenue to increase 17% q/q, plus or minus 3%. The midpoint of guidance would result in a y/y increase of 12%.
- Non-GAAP gross margin to be approximately 33%, Non-GAAP operating expenses to be approximately $370 million,
- THATIC JV licensing gain of approximately $20 million
- Non-GAAP interest expense, taxes and other to be approximately $30 million, and Inventory to be down versus Q1 2017.
Key risk factors and potential stock drivers:
The company’s ability to ramp-up profitability while sustaining its revenue growth would be one of the key stock driver over the near to medium term.
The company is scheduled for product announcement during May 2017, any positive product and technological announcement would be a key trigger for the company.
The company has launched various new products during Q1 and many others are lined up for upcoming quarter. The performance of the same would have a key bearing on company’s business & financial risk profile.
On Friday, May 5th, 2017, AMD shares increased by 0.89% to $10.19 on an average volume of 61 million shares exchanging hands. Market capitalization is $9.68 billion. The current RSI is 28.19
In the past 52 weeks, shares of AMD have traded as low as $3.45 and as high as $15.55.
At $10.19, shares of AMD are trading below its 50-day moving average (MA) at $13.37 and above its 200-day MA at $9.82.
The present support and resistance levels for the stock are at $10.00 & $10.32 respectively.
About Traders News Source, our track record and what to expect as a new member.
Welcome to Traders News Source Small Cap Research (see our track record below)
Expect 3-4 small cap profiles per month consisting of two emails per week. We do not spam or send emails daily, we understand that is annoying! Our reports are only sent when we see an actionable situation and potential for near term gains.
Traders News Source recent profiles and track record, 534% in verifiable potential gains for our members on 3 small cap alerts alone!
January 31st, 2017 (NASDAQ: HIMX) opened at $5.10/share and hit a high of $9.68/share March 24th, 2017 for gains of 89% within 60 days- http://finance.yahoo.com/news/himax-technologies-review-4q-2016-130000319.html
February 6th, 2017- (NASDAQ: SCON) opened at $1.12/share hit a high of $1.80/share within 10 days our member potential gains- 60% – http://finance.yahoo.com/news/superconductor-technologies-potential-revolutionize-smart-130000844.html
March 6th, 2017 (OTC: USRM) opened at .035/share and hit over .17/share within 25 days for gains of 385% for our members- http://finance.yahoo.com/news/traders-news-issues-comprehensive-report-130000743.html
These are numbers that make traders drool. Any trader in any market would fall all over themselves to see numbers like this. So, if you’ve been on the fence, perhaps it’s time to start doing some research and verify our numbers for yourself. We are constantly raising the bar and separate ourselves from the rest of the small-cap newsletters as the best in business.
We know with a large following comes a large responsibility as we have everyone from institutional investors to the beginner following our profiled securities in our newsletters. This is something we take very seriously always seeking small cap growth companies that have both near and long-term potential for our members.
Limited Time Offer VIP Mobile Alerts
***Get our small cap profiles, special situation and watch alerts in real time. We are now offering our VIP – SMS/text alert service for free, simply text the word “Traders” to the phone number “25827” from your cell phone***
Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.