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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

AMD Earnings: This Is What You Need to Know

Advanced Micro Devices (AMD) has chopped around the $50s for a few weeks heading into Q1 earnings as work-from-home and virtual telemedicine demand has boosted the need for computers and data centers. At the same time, the shutdown of the global economy is expected to ultimately damper electronics demand in the near term while the chip company is positioned to slowly take market share from Intel (INTC).

In not much of a surprise, AMD widened the annual revenue guidance range for the year due to economic uncertainty around consumer demand due to the coronavirus outbreak. The high demand in data centers and upcoming new gaming consoles should ultimately lead to a strong year for the chip company.

Q1 Results

For Q1, AMD met analyst estimates with revenues at $1.79 billion and an EPS of $0.18. The stock is likely to initially trade down because the chip giant didn’t beat estimates.

The key number in the quarterly report was the 500-basis point boost in gross margins to 46%. AMD even saw gross margins grow 100 basis points from the 45% level in the strong Q4 when revenues were up at $2.13 billion.

The company is now generating solid net income after going through a period where investors thought AMD would never produce profits again while competing against Intel. For Q1, operating income was $222 million and when combined with Q4 results, AMD has now generated $505 million in net income over the last two quarters alone.

The company ended the quarter with a cash balance of $1.4 billion. AMD now has a net cash position of nearly $1.0 billion after spending the last decade with sizable debt balances that almost forced the company into bankruptcy.

What To Watch

AMD guided to Q2 revenues of $1.85 billion, plus or minus $100 million for an increase of 21% over last Q2. The amount is generally inline with previous analyst estimates of $1.95 billion, though definitely a reduction at the midpoint.

For the full year, AMD actually guided to 25% revenue growth with upside to 30% growth. These numbers were generally inline with previous estimates prior to the global shutdown for the coronavirus placing the chip company in one of the few positions of still expecting strong growth in 2020.

The company had previously guided towards 2020 revenues of $8.68 billion based on revenue growth of 29% off the $6.73 billion base last year. The 25% growth rate would generate 2020 revenues of $8.41 billion with upside potential pushing revenues to $8.75 billion.

The key Enterprise, Embedded, and Semi-Custom segment that includes the EPYC data center chips continues to struggle with revenues dipping in the quarter to only $348 million. The revenue boost for the 2H of the year is forecasting huge growth from the data center chips and semi-custom chips because of new consoles from Sony (SNE) and Microsoft (MSFT).


The key investor takeaway is that AMD continues to expect strong demand this year. The market will initially sell off the guidance, but the stock will ultimately rally based on the increasing expectations for tremendous demand for data center and console chips despite coronavirus questions.

Investors should use any dips into the low $50s as an opportunity to load up on AMD. (See AMD stock analysis on TipRanks)

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