AMD stock falls ahead of earnings
Today, Advanced Micro Devices (AMD) is set to report its first-quarter earnings after the market closes. The stock fell 2.6% ahead of its earnings as most chip companies that reported earnings either met or missed estimates. AMD stock rose 50% year-to-date after growing 80% in 2018. The stock is currently trading at 4.6x its sales, which is higher than Intel’s (INTC) price-to-sales ratio of 3.4x and the industry average of 4.5x. This ratio shows the amount investors are willing to pay for every dollar in a company’s sales.
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The above ratio shows that investors have already price in a year-over-year sales growth of 8% for full-year 2018. AMD’s stock would increase if the company beat revenue estimate and reported stronger guidance. Let’s see what investors should look out for in today’s earnings.
Expectations with AMD’s first-quarter earnings
In the first quarter, Intel reported a 13% to 17% sequential decline in PC and server CPU sales, partly due to an overall decline in demand and partly due to customers’ shift to AMD processors. AMD is likely to report strong revenue growth from Ryzen PC and EPYC server CPUs, which would be partially offset by significant declines in client GPUs. The GPU decline should be more prevalent in the first quarter as AMD battles excess inventory because of falling crypto-related demand.
Things to look for in AMD’s first-quarter earnings
AMD is also to share some announcements about the launch of its third-generation Ryzen CPU, second-generation EPYC server CPU, and Navi GPU. All three products will be built on TSMC’s (TSM) 7nm node. These 7nm products are important for AMD as Intel is set to put its 10nm laptop CPUs on shelves this holiday season.
Investors should also watch out for AMD’s data center revenue and guidance as all chip companies with exposure to data center markets have reported weak demand for the first half.
Investors should also see if AMD maintains its full-year 2019 guidance of 8% revenue growth or changes it in light of current developments. Intel reduced its 2019 revenue guidance by $2.5 billion, and it now expects a 2.5% decline in revenue instead of 1% growth.
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