Advanced Micro Devices (AMD) is slated to release earnings in just a few minutes, as investors look to see if sky-high share prices are justified.
AMD stock has surged in 2019, up 78% since the beginning of the year. The company has announced or launched a slew of new products, including being contracted by the US government to take part in building the world’s most powerful supercomputer. Of course, the huge story for 2019 continues to be the release of its 7nm processor, which is expected to power the company to new heights, while also decreasing the distance between it and rival Intel (who still continues to struggle with 10nm production).
Ahead of the release, analyst Christopher Rolland of Susquehanna remains Neutral on the chip giant, but increases his price target by $2, to $32, which implies a slight downside from current levels. (To watch Rolland’s track record, click here)
Investors are bracing for a 13% revenue drop since last year, as per the company. In fact, not much good news is expected from the second quarter release. But Wall Street will be looking forward, as AMD is expected to continue eating market share with its release of new products. Many expect the third quarter to be the one to watch, and will keep their eyes on what the company says about its near-future.
Like many analysts, Rolland says the “focus of the report will be management’s expectations for the company’s new 7nm products,” which launched earlier this month. This is why the third-quarter is so critical — the 7nm chips have been raved about for months now, so with next quarter’s release, investors will get to see whether or not sales match the hype. Important for today’s release, investors will get the chance to see what AMD management says about the 7nm, about one month since the launch.
But Rolland remains cautious on the third quarter. While the analyst says, “the launch of 7nm Ryzen desktop CPUs and Navi gaming GPUs should benefit from the initial channel fill and help drive better than typical revenue growth,” he believes Wall Street’s 27% QoQ revenue rise may be “may be difficult to meet.”
Even as the analyst isn’t as optimistic about the third quarter as others, he is “impressed by the progress AMD has made and the further opportunities it has with 7nm to take share from Intel.” His concerns are pushing him to maintain Neutral, but other factors are contributing to the slightly rise in price target.
All in all, the impending release will be a major factor in investors’ judgement on AMD, but everything will still be based on expectations for the near-future. Nevertheless, many in the analyst community is bullish on its stock. TipRanks analysis of 21 analyst ratings show a consensus Moderate Buy rating with 13 analysts Buying and eight Holding. (See AMD’s price targets and analyst ratings on TipRanks)