Since topping around $34 last month in September, AMD (NASDAQ: AMD) has yet to trade above the $30 level this month. Markets struggle with two fundamental things ahead of the next quarter’s earnings report. AMD’s stock is relatively expensive compared to Intel (NASDAQ: INTC). Conversely, EPYC, with its infinity fabric (IF), and Ryzen on the PC markets are technical superior over Intel’s offerings. How will these two dynamics play out in the earnings report? AMD reports earnings on Oct. 23 after the market closes.
AMD will likely beat consensus estimates on server and PC sales. Markets will care more about the company’s forecast for the upcoming holiday sales period. Since component prices dropped in the double-digits, the lower costs could drive consumer PC upgrades. Savings from lower prices in memory and storage, especially high-speed solid state drives, could lead to consumers picking mid or high-end Intel or AMD CPU parts. For AMD, higher sales of the Polaris and Vega GPUs would give revenue an even bigger lift.
In the next year, AMD should gain market share over Intel on both the desktop and server markets. And while both companies will enjoy higher demand, thanks to lower prices, profit margin will hold, even for Intel. AMD’s Ryzen 2 will have a higher ASP compared to the last generation chip. Ryzen’s third generation chip will benefit from AMD building its brand awareness for the CPU over the last two years.
