AMD Analyst Roundup Following Earnings

Shares of Advanced Micro Devices, Inc. AMD traded at new 52-week lows on Friday following the release of the company's second quarter earnings on Thursday. Here is a summary of what some of Wall Street's top analysts are saying. MKM Partners: High Bar On Revenue And Gross Margin Recovery Ian Ing of MKM Partners commented in a note that AMD only "modestly" disappointed in its quarterly results. The analyst noted several positives within the print, including the company's expectations to grow the rest of the year from a second quarter revenue "trough" and plans to bring its operating expenditure in-line with its "ongoing revenue profiles." However, the analyst questioned the "pace of the revenue recovery" given concerns over the new product pipeline. Ing continued that he sees several "challenges" to a robust revenue and margin recovery including a "prolonged" semi-custom effort (24 to 36 months) for a "modest" revenue and operating margin opportunities. Bottom line, the analyst noted "there were several positives" on the post earnings conference call, but none represented a "significant snapback" in revenue and/or gross margins. Shares remain Neutral rated with an unchanged $2.50 price target. Bank Of America: Many Challenges Ahead Vivek Arya of Bank of America commented in a note that AMD's strategy of servicing PC, GPU, Semicustom and Embedded biz could be "unrealistic" given PC headwinds and the company's cash burn. The analyst also suggested that the company's operating expenditure needs to be lowered to fiscal 2013 or 2014 levels or even lower. Looking forward, multiple structural and competitive challenges remain: 1) an uncertain PC and Windows 10 demand outlook, 2) "Uncomfortably high" cash burn of $130 million forecasted until the third quarter, 3) "unspecified" future restructuring and wafer supply cash requirements, and 4) continued operating expenditure cuts that "make it harder" to compete against some of its. "heavily-resourced" peers. Bottom line, AMD's situation remains "challenging" and demands a "more strategic review of viable options." Shares remain Underperform rated with a price target lowered to $2 from a previous $2.25. Credit Suisse: Growth Challenges ‘Extended' John Pitzer of Credit Suisse commented in a note that AMD's sequential decline in the quarter was driven by a weaker than expected consumer PC market that more than offset the seasonal strength the company showed in Semi-custom sales. Nevertheless, AMD is now expecting to see growth (Pitzer is projecting 1.2 percent growth) in the second half of 2015 as PC demand should stabilize and the company benefits from new products ramp. However, the analyst pointed out that his projection pales in comparison to the 15 percent growth rate the company suggested at its Analyst Day (05/06). Looking forward, Pitzer believes that AMD's share losses in PC will continue and its GPU performance will fall relative to its peers. In addition, the analyst is now worried that gaming likely peaked in 2014 and advantages of HAS are "still unclear" and its three semi-custom designs are unlikely to ramp before 2016. Shares remain Underperform with an unchanged $1.90 price target.