Get ready, bargain shoppers. Advanced Micro Devices (NASDAQ:AMD) plummeted 7% today after releasing its Q2 earnings, and it looks like the stock received more lashes than it deserved — at least, according to Wall Street pros.
In the recent Q2 report, AMD’s revenue did experience a decline compared to the same period last year. However, the figure still managed to outperform Wall Street’s expectations.
Specifically, the top-line showed $5.36 billion, amounting to an 18.2% year-over-year decline yet beating the consensus estimate by $40 million. By segment, Data Center reached $1.3 billion (an 11% drop), Client hit $998 million (down 54%), Gaming came in at $1.6 billion (4% drop), although Embedded was up 16% to $1.5 billion.
Gross profit fell by 19% to $2.44 billion, although that did not affect gross margins, which stayed flat at 46%. That helped the profitability profile come in slightly better than expected, with the company delivering adj. EPS of $0.58, edging ahead of the Street by $0.01.
For Q3, revenue is expected in the range between $5.4-$6.0 billion, at the midpoint, below consensus at $5.85 billion. Gross margins are expected to reach 51%, a five-point improvement vs. Q2.
While the results were not all a slam dunk, investors took heart from the positive noises made regarding the company’s AI products.
This is a point picked up by Rosenblatt 5-star analyst, Hans Mosesmann. “To wit, despite weaker Enterprise and Embedded, Data Center will grow ~50% in 2H23 vs 1H23. The MI250/300A/X now has 7x the ‘broad-based’ design wins/engagements q/q with better-than-expected performance in an AI market where Nvidia is supply constrained into 2024. MI300 ramp will extend meaningfully beyond the El Capitan supercomputer in 4Q23,” Mosesmann opined.
Not only do the MI250/300A/X products provide AMD with a “meaningful presence in AI acceleration” for the coming years, Mosesmann says AMD is still on track to “structurally change the competitive landscape in x86 CPUs.”
Some back-of-the-envelope calculations have AMD snaring 8-10% x86 server CPU share in 2H23, climbing to around 30% compared to Intel. “This share will likely reach 50% given Intel’s roadmap cannot counter AMD’s superior core density and power efficiency, critical for TCO-obsessed hyperscale players,” Mosesmann went on to add.
Accordingly, AMD remains a ‘top pick’ for Mosesmann, who sticks with a Buy rating and gives the shares a Street-high price target of $200. There’s plenty of upside – 83% to be exact – should the target be met over the next 12 months (To watch Mosesmann’s track record, click here)
Overall, AMD retains most of the Street’s support; based on 25 Buys vs. 6 Holds, the stock claims a Strong Buy consensus rating. The average target stands at $109.35, implying the stock will add ~28% of gains over the one-year timeframe. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
