Will Investors Believe AMD's (AMD) Back End Loaded Guidance? - FBR

AMD (NASDAQ: AMD) announced in-line 4Q15 results but worse-than-expected 1Q16 guidance driven mostly by worse-than-expected console APU shipments, FBR Capital analyst Christopher Rolland notes. EPS for 2016 were also affected by worse-than-expected opex guidance, offsetting some of the cuts disclosed last quarter.

Strangely, management guided console revenue to grow year over year, implying a massive seasonal ramp in 2H16. The analyst believes this could be because the company may envision a coming price reduction for Xbox that could drive sales upside.

EPS for 2016 were also affected by worse-than-expected opex guidance, offsetting some of the cuts disclosed last quarter. While AMD, a company with a history of execution issues, will have its work cut out for it in the back half of the year, there were some things to like including better-than-expected 2016 capex guidance and a flat FCF expectation.

For 4Q15, revenue was $958 million (–10% quarter over quarter and –23% year over year), in line with the Street’s $955 million estimate. The computing and graphics segment was much better than expected, growing +11% sequentially to $470 million, primarily owing to higher notebook processor sales. AMD's pro forma loss per share of $0.10 was in line with the Street’s expectations.

For 1Q16, AMD guided revenue down –14% quarter over quarter to $824 million at the midpoint, worse than the Street’s $899 million estimate. The forecasted revenue decline was primarily driven by game console seasonality and a cautious macro environment in China.

No change to MarketPerform rating or $2.50 Price Target.

For an analyst ratings summary and ratings history on AMD click here. For more ratings news on AMD click here.

Shares of AMD closed at $1.95 yesterday.

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