5 Top AMD Analysts Reflect on Preliminary Results, Shares Down 5%

October 7, 2022 6:17 AM EDT
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Shares of Advanced Micro Devices (NASDAQ: AMD) are down about 5% in pre-open Friday after the chipmaker preannounced Q3 results.

AMD reported preliminary revenue of $5.6 billion, a significant miss compared to its guidance midpoint of $6.7 billion and the consensus estimate of $6.69 billion. The gross margin is seen at around 50%, again much lower than the 54% consensus.

“Reduced revenue estimates reflect lower-than-expected Client segment revenue, which is a result of reduced processor shipments due to a weaker-than-expected PC market and significant inventory correction actions across the PC supply chain. In line with the company’s expectations, Data Center, Gaming, and Embedded segments' revenues each increased significantly year-over-year,” the company said in the pre-announcement.

CEO Lisa Su also blamed the slowdown on much weaker PC demand and “a significant inventory correction across the PC supply chain.”

Here’s what top AMD analysts have to say about the pre-announcement.

Goldman Sachs’ Toshiya Hari (cuts PT to $84 from $88): “We reduce our forward estimates for AMD and Intel. While the pronounced contraction in Client segment revenue at AMD (-53% qoq in 3Q22) will likely catalyze further debate on what 'normalized' PC demand looks like, we nonetheless maintain our constructive view on the stock as we envision share growth in server CPU and an improvement in business mix (i.e. higher % of revenue originating from Data Center opportunities) driving above-average revenue growth and margin expansion in the medium- to long-term.”

Susquehanna’s Christopher Rolland (cuts PT to $85 from $95): “We highlighted the risks last week in our PC Industry update in which we cut estimates/PTs for Intel, AMD and NVIDIA. However, this preannouncement may imply something a bit worse. A disappointing 3Q and/or 4Q from Intel may be next.”

Mizuho’s Vijay Rakesh (cuts PT to $102 from $125): “AMD pre-announced its SepQ earnings, seeing Rev/GM at $5.6B/50%, well below prior guide of $6.7B/54%, and we believe even weaker than feared with a softening PC/Server market… We believe with overall PC weakness and some near-term hyperscale push-outs, AMD could be entering a sub-seasonal cyclical DecQ/MarQ… [We reiterate] Buy as we see AMD well positioned longer-term in the PC, Data Center, and Gaming markets with share gains and strong roadmap.”

Rosenblatt’s Hans Mosesmann: “The AMD pre-announcement is not a surprise as driven by consumer PC and PC gaming segments and was also demanded by the Street as a needed reset. The reason we see for owning AMD is largely centered on the Data Center and dynamics of massive market share there are as valid today as they were yesterday from our perspective.”

Stifel’s Ruben Roy (cuts PT to $100 from $122): “We now forecast Q3 non-GAAP EPS of $0.69 versus our previous estimate of $1.06. We expect new product ramps and continued market share gains to drive a re-acceleration of year-over-year revenue growth in 2H 2023.”

By Senad Karaahmetovic

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