Stifel Sees Upside Potential In AMD, Says Q1 Print Shows Less Cryptocurrency Dependence Than Some Feared

Advanced Micro Devices, Inc. AMD reported a "solid" first quarter with a beat-and-raise Wednesday afternoon that reinforced Stifel's bullish stance on the semiconductor stock. 

The Analyst

Stifel's Kevin Cassidy maintains a Buy rating on AMD with a price target lifted from $13 to $14.

The Thesis

AMD's Q1 report was highlighted by the following, Cassidy said:

• A 23 percent quarter-over-quarter and 40 percent year-over-year increase in revenue to $1.647 billion versus Cassidy's expectations of $1.55 billion.
• Non-GAAP gross margin of 36.3 percent exceeded expectations of 36 percent.
• Revenue and gross margin were both lifted by a more favorable sales mix of Ryzen, Radeon and EPYC products.

AMD's management estimated that cryptocurrency-related products accounted for around 10 percent of total revenue in the quarter, the analyst said. This figure came in "much lower" than the 20 percent some investors were concerned about, Cassidy said. AMD expects the sales mix from cryptocurrency products to decline in the second quarter and come in at a mid-to-high-single digit percentage for the full year.

Encouragingly, AMD revised its full fiscal year 2018 revenue upward by double digits to a mid-20 percent rate, the analyst said. Gross margin was revised higher from at least 36 percent to at least 37 percent.

The bullish case for AMD's stock remains unchanged as the company faces the potential for upside versus expectations from EPYC server CPUs in the bottom half of 2018.

Price Action

AMD shares were rallying 13.7 percent to $11.04 at the time of publication Thursday. 

Related Links:

Credit Suisse: What To Expect From AMD's Upcoming Q1 Report

Are Cryptocurrency Woes Dragging AMD And Nvidia Shares Lower?