For the first time in a while, Advanced Micro Devices (NASDAQ:AMD) neither sold-off nor rallied big after reporting strong revenue and earnings. Though valuations are not great, the company’s prospects are better. Is that enough to bet on the stock trading to at least $30 or more?
AMD earned $0.06 a share (non-GAAP) as revenue fell 23% to $1.27 billion. Gross margin is up nicely to 41%, up from 36% last year. ASP rose Y/Y, driven by Ryzen processor sales. But client ASP fell due to a fall in mobile processor ASP. GPU ASP rose, helped by datacenter GPU sales.
The reporting quarter is potentially the rockiest and most volatile. The company is set to launch Navi, a mid-range GPU, which will add more meaningfully to results compared to Radeon 7. A Ryzen CPU refresh could also drive revenue growth higher for the rest of 2019.
Outlook
AMD expects revenue to be approximately $1.52 billion, plus or minus $50 million, an increase of approximately 19% sequentially and a decrease of approximately 13% year-over-year. Growth is driven by all units of the business. Still, negligible blockchain sales and lower graphics channel sales, plus weak semi-custom revenue, are headwinds to the overall results. But non-GAAP gross margin of 41% in 2H/2019 should lead to stronger profits.
Your takeaway
AMD’s has solid prospects. Expect the uptrend to hold.
