Advanced Micro Devices, Inc. (AMD) May Deliver Strong 4Q Results, But They Already Baked Into Share Price: Christopher Rolland

Bulls get ready, because Susquehanna analyst Christopher Rolland angles for a meaningful fourth quarter earnings beat from Advanced Micro Devices, Inc. (NASDAQ:AMD) once the bell tolls tomorrow evening. With Ethereum-related GPU sales soaring more than ever before, the analyst is out hiking estimates on the chip giant ahead of the print.

Yet, interestingly enough, Rolland believes “AMD’s lofty valuation embeds much (if not all) of these great results.”

As such, the analyst reiterates a Neutral rating on AMD stock with a $13 price target, which implies a slight downside from current levels. (To watch Rolland’s track record, click here)

Though Rolland is choosing to play it on safe on AMD, he is nonetheless lifting his fourth quarter revenue projection a whopping +$75 million ahead of the company’s guide and taking his first quarter estimate for 2018 +$40 million beyond the Street.

“We anticipate significant upside to 4Q17 results/1Q18 guidance, buoyed by: 1) Ethereum-related GPU sales (as much as $250 million with $100 million incremental QOQ); 2) an ASP lift for both CPU (perhaps increasing double digits in desktops) and GPU (+6% QOQ), also driving GM upside; and 3) continued Ryzen desktop share gains (+240 bps QOQ vs Intel),” highlights Rolland.

Additionally, the analyst questions whether crypto-currency-related sales are “ultimately good or bad,” commenting: “While we think ultimately bad (and we are sticking to this opinion), we have spoken to many that believe these sales are simply ‘extra’ on top of the core business and that shares should be given (some) credit. AMD’s results Tuesday may be at the center of this debate.”

Rolland for this reason has boosted his expectations “to account for this benefit” finding that these sales now make up a substantial slice of AMD’s revenue. Not only did crypto-related GPU sales take off during the fourth quarter, but they are still exhibiting growth this month.

On a final note, Rolland acknowledges AMD has gained “ground” in capturing desktop CPU market share in the fourth quarter, anticipating a bigger Ryzen Mobile impact to hit in the first quarter of this year.

TipRanks indicates a cautious, yet positive analyst consensus assessing Advanced Micro Devices stock. Based on 11 analysts polled in the last 3 months, 7 are bullish on the chip giant, with 2 remaining on the sidelines and 2 running for the hills. With a return potential of nearly 23%, the stock’s consensus target price stands at $16.35.

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