Advanced Micro Devices Inc. (NASDAQ: AMD) earnings will serve as an important indicator on whether the semiconductor outlook is truly weak in early 2022, or whether it’s just weak for certain companies.
AMD is scheduled to report earnings after the bell on Tuesday, as the PHLX Semiconductor Index teeters on the brink of a bear market. Chip stocks have struggled of late as a majority of the chip and chip-related companies reporting earnings so far have presented weak outlooks for the current quarter.
“Even after raising guidance multiple times through 2021 from 37% to 50% to 60% to now 65%, we believe AMD has the capacity to deliver upside, which would have been higher with a better supply,” Ramsay, who has an outperform rating and a $150 price target on AMD, wrote.
“We expect management to set an aggressive, but achievable outlook for 2022 that demonstrates continued PC and server share gains (including enterprise in both), while still leaving room to raise numbers through the year as supply improves further,” the Cowen analyst wrote.
AMD’s previous quarter was so strong that analysts had trouble nitpicking results three months ago. One milestone to watch is if AMD’s profit margins meet or exceed the 50% threshold, which has become even more significant as Intel executives seek to keep their margins “comfortably above 50%,” or in the 52% to 53% range for the year. AMD reported margins of 48% in the third quarter, up from 44% in the year-ago period, but unchanged from 48% in the second quarter.
News on a big deal closing would also be welcomed by investors. With Nvidia Corp.’s deal to acquire Arm Ltd. reportedly falling apart, that makes AMD’s conditional regulatory approval from Chinese regulators for its $35 billion deal to acquire Xilinx Inc. even more significant. AMD disclosed late last year that it expects the deal to close this quarter.
Earlier in the year at CES, AMD announced a slew of new products including a $200 graphics card.
What to expect?
Earnings: AMD on average is expected to post adjusted earnings of 76 cents a share, up from 52 cents a share reported in the year-ago period, according to a FactSet survey of 32 analysts. Estimize, a software platform that crowdsources estimates from hedge-fund executives, brokerages, buy-side analysts, and others, calls for earnings of 80 cents a share.
Revenue: AMD, on average, is expected to post revenue of $4.52 billion, according to FactSet, up from the $3.24 billion reported in the year-ago quarter. AMD had forecast $4.4 billion to $4.6 billion. Estimize expects revenue of $4.61 billion.
AMD LONG (Buy)
Enter at: 118.87