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Loop Capital On AMD’s Q3: Lack Of Transparency Was A Concern

Courtesy of Benzinga.

Loop Capital On AMD's Q3: Lack Of Transparency Was A Concern

One of the biggest issues with Advanced Micro Devices, Inc. (NASDAQ: AMD)’s third-quarter earnings report and fourth-quarter guidance was a lack of transparency, according to analysts Loop Capital Markets.

AMD managed to report another beat due to a ramp of new products and strong performance in game consoles, analyst Betsy Van Hees wrote in a report. Looking forward to the fourth quarter, the company’s revenue guidance calling for a decline of around 15 percent quarter-over-quarter was “solidly” better than what the Street had expected. The revenue also implies a pro forma EPS of around 5 cents per share in the fourth quarter, which represents a 1-cent beat versus consensus estimates.

While this all sounds encouraging, the quality of AMD’s third-quarter beat is “unclear” since a portion of its revenue was derived from a one-time IP revenue deal, the analyst said. It’s not known what contribution this played in the beat. The company’s margin guidance of 35 percent is also a disappointment given expectations for a more favorable sales mix away from semi-custom SOCs towards more gross margin rich CPU and GPUs products.

Looking forward, uncertainty surrounding revenue contributions and gross margin expansion implies the stock should trade at a discount to its peers. Specifically, the analyst’s $13 price target (down from $14) is calculated on a 2.7x EV/2018 revenue estimate, which is below the blended peer group average of 4.7x.

Van Hees maintains a Hold rating on AMD’s stock.

Related Links:

This AMD Bear Is No Less Bearish Ahead Of Q3 Earnings

A Bullish Call On AMD’s Q3 Earnings, Guidance

Image credit: Luis Romero, Flickr

Latest Ratings for AMD

Date Firm Action From To
Oct 2017 Barclays Maintains Underweight
Jul 2017 Baird Initiates Coverage On Outperform
Jul 2017 BMO Capital Downgrades Outperform Market Perform

View More Analyst Ratings for AMD


View the Latest Analyst Ratings

Posted-In: Betsy Van Hees GPU Loop Capital Markets PCAnalyst Color Price Target Analyst Ratings Best of Benzinga


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