Shares of AMD (AMD) are under pressure after the company’s revenue outlook for the fourth quarter missed consensus expectations. However, Northland analyst Auguste Richard upgraded the stock to Outperform as he believes the selloff in shares is “overdone”, an opinion shared by several other Wall Street analysts.
RESULTS: Last night, AMD reported third-quarter earnings per share of 13c and revenue of $1.65B, with consensus at 13c and $1.7B, respectively. For the fourth quarter of 2018, AMD said it expects revenue to be approximately $1.45B, plus or minus $50M, with consensus at $1.6B. The company noted that this is an increase of approximately 8% year-over-year, and said it expects non-GAAP gross margin to increase to approximately 41%, driven by sales growth of Ryzen, EPYC and datacenter GPU processor sales.
SELLOFF ‘OVERDONE’: In a post-earnings research note, Northland analyst Auguste Richard upgraded AMD to Outperform from Market Perform, with a $26 price target. The analyst told investors he believes the selloff in shares is “overdone” and sees catalysts from consensus estimates reflecting headwinds from the Semi-custom and Crypto implosion, November 6 analyst meeting, launch of 7nm data center GPU in Q4 and 7nm Server CPU likely 1H 2019, flexible production using 2 foundries and multi-chip packaging, and reduced CPU output upside in the fourth quarter. Also bullish on the stock, Mizuho analyst Vijay Rakesh said he is a buyer of AMD on the selloff following last night’s quarterly results. While the analyst sees GPU inventory declining, he argued that AMD’s server market share trajectory should be a “key driver” into 2019 with 7nm EPYC already widely sampling 12 months ahead of Intel (INTC). Rakesh reiterated a Buy rating on the stock. Meanwhile, Jefferies analyst Mark Lipacis also called the selloff in AMD’s shares an “overreaction”. The analyst highlighted that the company will ship a 7nm server microprocessor units “well ahead” of Intel, as well as a 7nm data center GPU “well ahead” of Nvidia (NVDA). Lipacis also noted that he expects this will translate to share gains and continued gross margin expansion for AMD. While he lowered his price target on the shares to $30 from $36, the analyst reiterated a Buy rating on AMD’s shares.
