There are a lot of Advanced Micro Devices (AMD) bulls out there, and rightfully so. If the company does figure out how to become a third major player in the semiconductor market, then AMD stock could soar from here. While Intel has $200 billion-plus market cap and NVIDIA holds nearly $100 billion, AMD has a market cap of just $22 billion. From this perspective, strong fourth-quarter numbers could re-energize the bulls, while freaking out the bears.
Ahead of the print tomorrow, Rosenblatt analyst Hans Mosesmann expects in-line Q4 sales of $1.45 billion and non-GAAP EPS of $0.09 (vs. consensus $0.08). Mosesmann expects the quarter will be characterized by strong Ryzen/EPYC CPU momentum with significant weakness in game consoles (entering end of cycle year), and weak desktop GPU (crypto).
For 1Q19, Mosesmann sees management guiding sales down slightly sequentially (consensus up slightly) on continued weakness in GPU/crypto and game consoles, which offset strength in Ryzen/EPYC CPUs which are benefiting from share gains from a low base and Intel CPU constraints.
“We see Lisa Su’s multi-year investments continuing to pay off going forward in an environment where AMD is establishing both architectural and process technology leadership over Intel and establishing a competitive GPU portfolio vs. Nvidia,” Mosesmann noted.
Based on his bullishness, Mosesmann reiterates a Buy rating on AMD stock with a $40 price target, which implies nearly 80% upside for the stock from current levels. (To watch Mosesmann’s track record, click here)
On the other hand, BMO analyst Ambrish Srivastava offers some caution, reiterating a Market Perform rating and $18 price target, showing about 20% downside for the stock. (To watch Srivastava’s track record, click here)
Srivastava noted, “For AMD, our estimates on EPS are lower for 4Q, and in line for 1Q (likely due to an assumption of lower GM). For 4Q18, we expect revenues of $1.45B, down 12% q-q and EPS of $0.06, vs. consensus’ estimates for revenues of $1.44B, down 13% q-q and EPS of $0.08. For 1Q19, we model revenues of $1.57B, up 8% q-q, and EPS of $0.08, vs. consensus’ estimates for revenues of $1.48B, up 3% q-q and EPS of $0.08. For 2019, we remain well below consensus at $0.45 vs. $0.61. The December quarter is where AMD has put a stake in the ground on the server share milestone metric of a 5% unit share.”
“During the call, we will be looking for the company’s comment on its server market share in Q4, and its expectation for 2019. During 3Q18 earnings call, AMD noted it is on track to exit 2018 with mid-single-digit market share. We are also looking for the company’s expectation for revenue growth, GM and OpEx for 2019. As a reminder, AMD has set a long-term GM goal of 40-44% vs. our expectation of 38.0% in 2018,” the analyst added.
Overall, AMD has 11 bullish analysts in its corner vs. 8 analysts who play it safe on the sidelines. The 12-month average price target (from a pool of Street-wide expectations) showcase 21.52% in upside potential for the ‘Moderate Buy’ rated stock. (See AMD’s price targets and analyst ratings on TipRanks).