Is AMD Stock a ‘Sell’ after Its Q1 Earnings?

On Tuesday, Advanced Micro Devices (NYSE:AMD) stock fell about 4% after hours. The shares fell after the semiconductor company reported its first-quarter earnings results. AMD met analysts’ consensus revenue and earnings estimates in the first quarter. However, investors were disappointed by the company’s weak revenue guidance for the second quarter.

AMD stock fell 1.7% on Tuesday and closed at $55.51. The stock was trading 6.3% below its 52-week high of $59.27. Meanwhile, the stock was trading 113.3% above its 52-week low of $26.03. At Tuesday’s closing price, AMD had a market cap of $65.0 billion.

AMD’s Q1 performance

In the first quarter, AMD reported an adjusted EPS of $0.18 compared to $0.06 in the first quarter the previous year. The earnings met analysts’ consensus estimate of $0.18 per share. Also, the revenues of $1.79 billion beat analysts’ consensus estimate of $1.78 billion. The first-quarter revenues rose about 40.4% YoY (year-over-year).

In the first quarter, AMD’s Computing and Graphics segment’s revenues rose 73.0% YoY to $1.44 billion—more than analysts’ consensus estimate of $1.31 billion. The revenue from AMD’s Enterprise, Embedded and Semi-Custom segment, which includes data-center and gaming-console chips, fell by 21.1% YoY to $348 million—lower than analysts’ consensus estimate of $459 million. The Enterprise, Embedded and Semi-Custom segment’s revenues fell YoY due to a reduction in gaming console sales.

According to a MarketWatch report, “Sony and Microsoft both reduced inventory in advance of next-generation console launches, we expect semi-custom revenue to increase in the second quarter and be heavily weighted toward the second half of the year as we ramp production to support holiday launches of the new Playstation 5 and Xbox series X consoles,” said Lisa Su, AMD’s chief executive.

Growth projection

AMD expects second-quarter revenues of $1.85 billion (plus or minus 100 million)—up 3.6% sequentially and 20.8% YoY. The company’s sales outlook for the second quarter was lower than analysts’ consensus estimate of $1.92 billion. For fiscal 2020, AMD expects revenue growth of about 25% (plus or minus 5 percentage points).

AMD’s management also expects the company’s gross margin to be around 44% in the second quarter, which is higher than 41% in the second quarter of 2019. The company’s operating expenses will likely grow by about 17.2% YoY to $600 million in the second quarter.

Wall Street analysts expect AMD to post sales of $1.9 billion in the second quarter—a rise of 24.2% YoY compared to $1.9 billion in the second quarter of 2019. Also, analysts expect the company’s adjusted EPS to rise by 150% YoY to $0.20 in the second quarter.

Analysts expect AMD’s revenues to rise by 27.0% YoY in 2020 to $8.55 billion. The sales will likely rise by 20.6% YoY in 2021 to $10.3 billion. The adjusted earnings could rise by 69% YoY in 2020 to $1.08 per share. However, the profits will likely rise by 46% YoY to $1.58 per share in 2021.

Analysts’ recommendations for AMD stock

Many analysts revised their target price for AMD stock after its first-quarter earnings results.

  • Wedbush increased its target price from $57 to $60.
  • Wells Fargo increased its target price from $50 to $55.
  • Mizuho increased its target price from $55 to $59.
  • Rosenblatt Securities increased its target price from $65 to $70.
  • Nomura Instinet increased its target price from $58 to $64.

AMD stock is tracked by 40 Wall Street analysts. Among the analysts, 19 recommend a “buy,” 20 recommend a “hold,” and one recommends a “sell.” Wall Street analysts’ mean target price on the stock is $51.99, which implies a 6.3% loss from the current level of $55.51. The consensus target price for the stock has risen from $49.53 in March—an increase of 4.8%.

AMD’s stock returns

Based on the closing price on Tuesday, AMD stock was trading 7.5% above its 20-day moving average of $51.64. The stock is also trading 14.5% above its 50-day moving average of $48.49 and 16.0% above its 100-day moving average of $47.85. AMD’s 14-day RSI (relative strength index) score is 60. The score indicates that the stock isn’t overbought or oversold. AMD’s lower, middle, and upper Bollinger Band levels are $41.76, $51.64, and $61.53, respectively. On Tuesday, the stock closed near its middle Bollinger Band level, which indicates that it isn’t overbought or oversold.

On Tuesday, the S&P 500 Index has fallen by 0.53%. Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC) fell by 1.9% and 1.2%, respectively, on the same day. Meanwhile, Micron Technology (NASDAQ:MU) and Qualcomm (NASDAQ:QCOM) returned 0.1% and -0.9%, respectively.

Qualcomm will likely report its earnings for the second quarter of fiscal 2020 today after the market closes. Wall Street expects the company to report an adjusted EPS of $0.78 on revenue of $5.03 billion. Read What to Expect from Qualcomm’s Q2 Earnings to learn more.

Earlier this month, Intel posted its first-quarter earnings results. The semiconductor company beat analysts’ consensus revenue and adjusted EPS estimates. Intel’s revenue of $19.83 billion beat analysts’ estimate of $18.70 billion, while its adjusted EPS of $1.45 was well above analysts’ forecast of $1.28. In the first quarter of 2019, Intel reported an adjusted EPS of $0.89 on revenue of $16.1 billion. Read Is Intel Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

Read Could AMD’s Q1 Earnings Report Boost Its Stock? to learn more about AMD.