MKM Partners analyst Ian Ing weighed in on two American multinational semiconductor companies Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC). The analyst has changed his price targets and estimates for the stocks, noting that he is cautious on both companies as they prepare to release first quarter earnings calls. Ing is ranked #259 out of 3,878 analysts on TipRanks, with a 62% success rate and an average return of 12%.
Advanced Micro Devices, Inc.
AMD is scheduled to report fiscal first quarter earnings after market close on Thursday, April 21. Ing expects the company to post quarterly revenue of $818.5 million and a pro-forma loss per share of $(0.13), both figures in-line with the analyst consensus.
The analyst notes that AMD has several new products and milestones in its pipeline, such as efforts to indrouce new IP monetization opportunities and semi conductor ramps; efforts to expose itself to the China ODM and white-box desktop channel; and offerings from GPU (Polaris) and CPU (Zen-based). In light of this pipeline, Ing questions whether customers will embrace or reject the aforementioned changes. The analyst reasons that even though the new product pipeline appears as though it has promising potential, he sees “continued uncertainty” on whether the company will be able to make up for lost share, given limitations in being able to fully reach their addressable markets.
The analyst expands on his dubiety for the stock’s success, noting, “We think any headline risk around AMD’s GPU refresh leap-frogging NVDA is a buying opportunity for NVDA,” as AMD and Nvidia compete in the semiconductor arena. He continues, “AMD takes time to ramp product in volume, as seen with the mid-15 R9 300 series launch.” In regards to exposure to the China ODM and white- box desktop channel, Ing believes this “appears particularly troubled following the STX pre-announcement.”
Further, the analyst comments on the Polaris launch, mentioning his proprietary GPU price tracker suggests only a slight change in the R9 300 series pricing stack. Ing explains, “Pricing is flat to down 2.2% QoQ across R9 Fury, 390X, and 380, while the ultra-premium R9 Fury X is up 2.4% QoQ (although only 7 SKUs).” The analyst expands on this with a positive indicator for AMD claiming, “Our thesis continues to be that benign GPU pricing is an indicator of a healthy GPU demand environment for current price-performance points, to the benefit of both NVDA and AMD.”
Ing summarizes that estimates for the stock remain unchanged, noting, “We await signs that a product cycle turnaround translates into revenue recovery.” Despite the analyst’s positive note on the healthy GPU environment, he remains cautious on AMD at large due to risks in the company’s pipeline.
Ing reiterated a Neutral rating for AMD, while raising the price target to $2.90 (from $2.50).
According to TipRanks, 11% of analysts covering the stock are bullish, 27% are bearish, and 45% are neutral. The average price target for the stock is $2.44 with a (-9.63%) downside.
Intel is scheduled to report earnings after market close on Tuesday, April 19. Ing estimate the company will post $13.61 billion in revenue and a pro-forma EPS of $0.47, slightly lower than the overall analyst consensus of $13.89 billion and $0.54, respectively. Ing’s estimates are lower than the overall consensus because he estimates further downside risk as he expects PC weakness to offset strength in cloud computing. Ing notes, “Our revenue estimates also reflect the revised reporting structure starting in Q1 (reorganizing relatively small non-volatile, Intel Security, and New Technology Groups).”
The analyst notes that based on his research, second quarter client computing may be flat following a sub-seasonal first quarter. The analyst further mentions that commentary on this quarter’s call may help provide clarity on three relevant issues. First, the analyst is waiting to hear conference call commentary on the significant management and organizational changes throughout the quarter. Ing explains, “We think Dr. Murthy Renduchintala (President of most non-data center activities) is very knowledgeable about the mobile space, and is very good at product execution.” Second, Ing is hoping to gain insight on investors interested in the mobile chipset prospects at top OEMs.
Third, the analyst notes that he is expecting sub-seasonal figures, explaining, “based on our checks, we think the PC customers of Taiwan ODMs are reluctant to hold inventory and wait for sell-through, hence quarterly builds are back-end loaded.” Ing elaborates on the last point, noting, “the result is a sub-seasonal 1Q (likely down 20%+ vs. the typical down 15%), and a 2Q with similar patterns resulting in limited visibility and a strong possibility of no growth.”
The analyst reiterated a Buy rating on INTC, raising his a 12-month price target to $38.00, up from his previous $40.00 estimate. Ing claims, “Our thesis remains out-performance from other segment’s benefits once PCs stabilize.”
According to TipRanks, 66% of analysts covering Intel recommending buying shares, while 30% are neutral and 4% are bearish. The average price target for the stock is $36.09 with a 14.72% upside.