With Advanced Micro Devices, Inc. (NASDAQ:AMD) preparing to release second-quarter earnings and third-quarter guidance this week, Susquehanna analyst Christopher Rolland offers investors a detailed look into key PC/server end market. Overall, given better than expected PC ODM builds, game console sales, and GPU stock-outs, Rolland is modestly constructive for the company’s report.
AMD’s Ryzen chips are off to a strong start in desktops, and more chips are coming in the second half of this year. According to Rolland, at the end of 1Q17, Ryzen PCs were less than 1% of all desktops in the marketplace, but ramped to almost 5% in the final two weeks of 2Q17. “We now find the processors in mainstream OEMs, including HP (Omen 880), Lenovo (IdeaCentre), and Asus (ATX gaming computer). AMD is also expected to launch Ryzen 3 for the low-end desktop market on July 27 and Threadripper for the very high-end desktop market in early August. That said, we remain confused as to why AMD appears to be slow rolling their CPU products during this short and unique window in which they can match Intel’s process technology,” the analyst noted.
Several concepts such as crypto-currencies have been gaining a lot of importance off late and AMD is ensuring that this segment is also taken care of. The analyst notes stock-outs for AMD’s RX 470/480/560/570/580 cards throughout the quarter, which likely points to GPU upside for AMD (although below potential). “A potential offset, our PC-SIGnals channel data points to NVIDIA gaining share in gaming (as well as Steam.com traffic share). Lastly, game console sales increased robustly YOY, a continued positive for AMD,” Rolland opined
The analyst also shared his two cents on EPYC’s performance, noting, “We offer investors our first look at the enterprise server market, which shows AMD’s share at less than 2% in front of Epyc’s ramp. The company is targeting double-digit share (going from essentially zero share today), though we would consider 5% a more realistic victory. Our conversations with Taiwanese white-box ODMs noted some frustration that they will not receive system development dollars from AMD.”
The bottom line: Rolland remains sidelined on AMD shares, reiterating a Hold rating with a price target of $12, which represents a potential downside of 15% from where the stock is currently trading. (To watch Rolland’s track record, click here)
Out of the 23 analysts polled in the past 3 months, 9 rate AMD stock a Buy, 10 rate the stock a Hold and 4 recommend a Sell. With a downside potential of nearly 12%, the stock’s consensus target price stands at $12.53.