Analysts Mixed On AMD After Earnings

Advanced Micro Devices, Inc. AMD announced weak first quarter results on April 16. Shares of the semiconductor company dropped 8 percent in after-hours trading following the earnings release. The company reported losses primarily due to the weakening PC market and lower SOC sales.

AMD posted first quarter revenue of $1.03 billion, below the analyst consensus of $1.05 billion and marking a 26% year-over-year decrease. The company posted non-GAAP ($0.09) loss per share, wider than the analyst consensus of ($0.05) loss per share. Furthermore, AMD posted an operating loss of ($137 million) compared to an operating income of $49 million in the same quarter of last year.

AMD’s Computing and Graphics segment revenue decreased 38% year-over-year and operating loss widened from ($56 million) to ($75 million). Furthermore, AMD’s Enterprise, Embedded, and Semi-Custom segment revenue decreased 7% year-over-year and 14% sequentially.

Forward-looking guidance did not offer much to celebrate either, with management expecting a 3% sequential decrease in second quarter revenue.

CEO Lisa Su commented, “Building great products, driving deeper customer relationships and simplifying our business remain the right long-term steps to strengthen AMD and improve our financial performance. Under the backdrop of a challenging PC environment, we are focused on improving our near-term financial results and delivering a stronger second half of the year based on completing our work to rebalance channel inventories and shipping strong new products.”

According to Smarter Analyst, Matt Ramsay of Canaccord Genuity reiterated a Hold on AMD and lowered his price target from $2.50 to $2.00. Ramsay acknowledged that the company’s quarterly report suffered from the “decline of its Computing & Graphics business,” but he believes that AMD’s “diversification strategy continues to show gradual progress and could position the company for more defensible long-term sales and even profitability should the cost basis be lowered further or new semi-custom deals produce higher margins.” Although Ramsay believes in AMD’s leadership, he will “wait for tangible signs of core business stability” since “more cost cuts will likely be required and could be announced in the coming weeks” As a result, Ramsay maintains his Hold rating “despite… estimates moving sharply lower.”

Matt Ramsay has a 76 percent overall success rate recommending stocks with a +7.7 percent average return per recommendation.

Separately on April 17, analyst David Wong of Wells Fargo reiterated an Outperform rating but lowered his price target range to $3 – $3.50, down from $3.50 – $4. Wong was disappointed in AMD’s earnings report and believes it now “emphasize[s] the substantial risks AMD faces given the continuing drop in sales and the ongoing losses the company is reporting.” Although Wong now predicts quarterly losses through 2016, he believes “AMD has valuable expertise in microprocessor and graphics circuit design from which, in time, it should be able to generate a profit.”

David Wong has a 67 percent overall success rate and a +10.9 percent average return per recommendation.

On average, the top analyst consensus for Advanced Micro Devices on TipRanks is Hold.