Advanced Micro Devices, Inc. AMD shares are down about 40% in the year-to-period, markedly underperforming the Invesco QQQ Trust QQQ. The latter, considered a proxy for blue-chip tech performance, has fallen a more modest 20% during the same period.
Will the first-quarter earnings report help stem the stock slide?
Key Metrics To Watch For: AMD is expected to report first-quarter earnings per share of 91 cents. This compares to the year-ago quarter’s 52 cents and the December quarter’s 92 cents per share.
Analysts, on average, expect the company to report revenues of $5.52 billion, representing a 60.30% year-over-year growth and 14.4% sequential increase. The company had in February guided to revenue of $5 billion, give or take $100 million.
Rival Intel Corporation INTC reported a 7% year-over-year revenue decline last week but managed to beat expectations both on the top and bottom line.
AMD expects the gross margin to expand from 50% in the fourth quarter of 2021 to 50.5%.
“We see revenues for the quarter being driven by strength across the board in key product areas and in higher server and client revenue offset by supply constraints,” Rosenblatt Securities analyst Hans Mosesmann said ahead of the earnings.
AMD reports under two business segments — Computer and Graphics and Enterprise, Embedded and Semi-Custom. The former includes desktop and notebook processors, chipsets, GPUs, and data center, and the latter consists of the server and embedded processors, system-on-a-chip products and gaming console products and services.
The tidings from the PC end market are not very positive. Intel reported a 6% quarter-over-quarter decline in Client Computing Group revenues, weighed down by consumer PC softness and inventory digestion in the channel. Market research firm Gartner said that worldwide PC shipments fell 6.8% year-over-year in the first quarter following a 10% growth in 2021.
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Forward Outlook: Despite the challenges faced by the tech sector, analysts are optimistic of AMD continuing to grow at a robust clip in 2022.
The consensus estimates call for second-quarter earnings of 99 cents per share on revenues of $6.38 billion, up 65.8% year-over-year. For the full-year, Street estimates EPS and revenue of $4 and $25.15 billion, respectively.
AMD had previously guided to full-year revenue of $21.5 billion.
Intel issued a soft guidance for the second quarter, citing inventory challenges in the wake of China lockdowns and inflation.
Earnings Call Focal Points: When chief executive officer Lisa Su and her executive team host the earnings call, AMD investors may be keen to find out how supply chain constraints will impact the company’s businesses going forward. Rosenblatt’s Mosesmann also expects the company to provide insights into PC and data center demand and intra-quarter revenue contribution from the recent Xilinx acquisition.
AMD Stock Take: AMD stock has recently bounced off support around $84. On the upside, the stock has resistance around $99.40. To make a meaningful move above that the stock has to go past the psychological resistance of $100.
Following the release of the fourth-quarter results in early February, the stock jumped over 5% in a single session.
Average analysts’ price target for AMD shares, according to TipRanks, is $145.23, suggesting over 60% upside potential.
In premarket trading, AMD shares were rising 1% to $90.74, according to Benzinga Pro data.
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