Analysts Look For Silver Lining In AMD's Q3 Print

Advanced Micro Devices, Inc. AMD is getting crushed Thursday following a disappointing third-quarter earnings report. Earnings of 13 cents per share beat estimates by a penny, while sales of $1.65 billion missed estimates. AMD sees Q4 sales of $1.4 billion to $1.5 billion, which also fell short of estimates.

Wall Street analysts remain polarized on AMD in the near term and are divided on whether or not the sell-off as a buying opportunity for investors. Here’s a sampling of what some analysts had to say about AMD following the report.

Silver Lining

Oppenheimer analyst Rick Schafer said margin improvements were a positive and should continue trending in the right direction now that the Ryzen, Vega and Epyc products are entering the mix.

“Staring down more established competitors with larger R&D budgets, we believe highend share gains against INTC/NVDA will prove challenging,” Schafer wrote.

Jefferies analyst Mark Lipacis said higher-than-expected GPU channel inventories were responsible for the Q3 guidance miss, but AMD’s margin expansion and share gain thesis remain intact.

“On the positive side, it appears AMD will ship a 7nm server MPU well ahead of Intel, as well as a 7nm data center GPU well ahead of NVDA,” Lipacis wrote.

2019 Outlook

Wells Fargo analyst Aaron Rakers said AMD’s bullish 2019 product cycle was not impacted by the report.

“While we believe AMD’s weaker 3Q18 results...and disappointing 4Q18 outlook amid a couple of quarters of GPU channel inventory reductions will pressure shares, our positive thesis on AMD’s 2019 product cycle / data center share gain story into 2019 remains unchanged,” Rakers wrote.

Morgan Stanley analyst Joseph Moore said AMD’s processor market share gains are taking longer than anticipated.

“Weaker results and outlook are not a big surprise to us, but they do call into question the rally in the stock in the last 3 months,” Moore wrote.

KeyBanc analyst Weston Twigg said Ryzen and Epyc market traction remains strong despite the disappointing guidance.

“AMD appears to be on track to meet its server CPU market share goals (we think it could hit 15% unit share in hyperscale by the end of 2019), it should continue to gradually gain share in client CPU, and we see opportunity for it to gain share in data center GPU,” Twigg wrote.

Ratings And Price Targets

• Wells Fargo has an Outperform rating and $30 target.
• Morgan Stanley has an Underweight rating and $17 target.
• Oppenheimer has a Perform rating.
• Jefferies has a Buy rating and $30 target.
• KeyBanc has a Sector Weight rating.

AMD was trading around $19.51 per share, down 14.4 percent at time of publication.

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