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UPDATE: Bernstein Lowers Advance Micro Devices Earnings Estimates and PT After 3Q13 Results

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In a report published Friday, Bernstein Research analyst Stacy Rasgon decreased estimates on Advanced Micro Devices (NYSE: AMD) and lowered the PT from $4 to $3 after 3Q13 results. Advanced Micro Devices reported 3Q13 results yesterday after the closing bell. AMD's results were up 25.8%QoQ at $1.461B above Bernstein's estimate of $1.426B and consensus of $1.416B. Gross margins on the surface were in-line with guidance but were inflated by approximately 1 point, or $19M from previously written down inventory sales. The analyst noted that without this benefit, gross margins were reported at 34.8% which is below guidance, consensus, and Bernstein of 36%.

Bernstein noted disappointments as "the core business was under significant pressure in the quarter, with MPU revenues down 6% driven by decreased unit volumes with flat overall ASPs; given mix shift toward Desktop however, ASPs within categories declined (again). Graphics were up >100% QoQ driven by game console revenues; but the core GPU business declined as AMD is in the middle of a product transition." The analyst saw computer solutions revenues down almost 6% in addition to a hit on server revenues. Rasgon commented that operating profit barely broke even with an operating gain of $22M, excluding the $19M inventory benefit.

The analyst concluded, "The quarter's results brought back serious concerns over the health of AMD's core PC business, which once again appears to be materially underperforming the market on both units and pricing, with company expectations for another challenging year in the market in 2014."

Bernstein decreased 2013 revenues from $5,347M to $5,248M, 2014 from $5,729M to $5,529M, and 2015 from $5,909M to $5,622M. The analyst's EPS estimates also decreased from -$0.06 to -$0.12 for 2013, from $0.22 to $0.03 in 2014, and $0.36 to $0.07 in 2015.

Shares of Advanced Micro Devices closed at $4.09 yesterday and is currently trading -12.35%.

Posted-In: Bernstein Research Stacy RasgonAnalyst Color Price Target Analyst Ratings


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