The more shares of Advanced Micro Devices (NASDAQ:AMD) rallies ahead of earnings, the higher the chances for disappointment. This could magnify a drop in the share price. And when Intel (NASDAQ:INTC) already reported weak PC and DC (data center) sales, what is the upside for AMD?
AMD closed at ~$22 and is valued at a rich 35.5 times forward earnings. Intel and Nvidia (NASDAQ: NVDA) trade at 10 times and 22.5 times forward earnings, respectively. Markets continue to signal a belief that AMD is taking Intel’s desktop, notebook, and server markets. Even though AMD has a compelling offering on chip performance, the price differences are not so wide that consumers will flock to AMD.
EPYC chip sales should do very well. Enterprises and business customers may buy EPYC-powered cloud space, get more performance and save money in the process.
GPU Sales Should Lag
Radeon 7 will give consumers an alternative choice over Nvidia but sales will not start until next month (Feb. 2019). Last quarter, AMD blamed the collapse in crypto pricing for the excess GPU inventory. It is unlikely that AMD will sell through its old GPU cards.
AMD’s EPS growth this year is expected to top 80% but growth in the next five years will be 15% annually. Analysts are bullish, too. If AMD beats and issues a stronger outlook, the stock could close above the analyst price target of $26.65.
