Bernstein Still Cautious On AMD Despite Big Quarter

There was a lot for investors to like about Advanced Micro Devices, Inc. AMD earnings, but some analysts still say investors should approach the stock with caution.

The Analyst

Bernstein analyst Stacy Rasgon reiterated a Market Perform rating and $13 price target for AMD.

The Thesis

AMD reported Q1 EPS of 11 cents on revenue of $1.65 billion, easily topping consensus estimates of 9 cents and $1.57 billion. Q2 revenue guidance of $1.725 billion was also well above consensus expectations of $1.574 million.

According to Rasgon, one of the most important metrics on the quarter was AMD’s updated full-year gross margin guidance, which was up 1 percent to “greater than 37 percent.” Rasgon said increasing margin guidance and product traction are signs AMD’s business may have reached an inflection point. Still, Rasgon says investors should remain cautious given AMD’s exposure to the deteriorating cryptocurrency mining market.

“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,” he said.

Rasgon also said rising operating expenses will also continue to put pressure on margins, even given the company’s impressive revenue growth.