The Advanced Micro Devices Tale Is Transitioning From 'Dreams To Reality'

Analysts at Bernstein are left wondering after Advanced Micro Devices, Inc. AMD's stock sank more than 10 percent following a lower-than-expected first-quarter earnings report.

Bernstein's Stacy Rasgon maintains a Market-Perform rating on AMD's stock with an unchanged $8 price target as the company has not yet provided investors with the "inflection point that many have been hoping for." Specifically, the company has offered plenty of "hopes and dreams" but the reality is the earnings report was "not good enough."

AMD's $0.04 per share loss and revenue of $984 million was in line with Rasgon's estimates, while a slightly higher than expected gross margin was cancelled out by a slightly higher operating expense relative to guidance.

'Still Hungry'

However, the main problem in the report is attributed to the second-quarter guidance, which was merely "roughly" in line with the Street's estimate — a disappointing outlook given the stock's strong gains over the past year and rising expectations.

Perhaps most concerning from AMD's guidance is management's expectations for gross margins at 33 percent would imply a decrease on a quarter-over-quarter basis even when factoring in a full quarter's worth of Ryzen parts.

Finally, AMD's annual earnings per share guidance along with a low-digit revenue growth also shows "no upside to current consensus."

Bottom line, the analyst paraphrasing Clara Peller, and concluded that investors are tasting "too much bun, not enough beef, and we're still hungry."