Morningstar | AMD Calls for Monster 2H Led By 7-nm Products; Raising FVE to $13 But Shares Overvalued
AMD reported a mixed-bag of a first quarter, with broad-based strength across Ryzen and EPYC processors as well as data center GPUs, more than offset by PC GPU softness and lower semi-custom chip sales. Second-quarter guidance implies revenue for the first half of 2019 will be down 18% from the same period in 2018. Despite these lower results, the market remains bullish on AMD’s ongoing 7-nanometer product ramps that will lead to third-quarter launches of Rome server CPUs and Navi gaming GPUs to directly combat Intel and Nvidia, respectively. Management anticipates full-year revenue growth in the high-single-digits, which implies top-line growth over 40% in the second half of 2019. While we concede AMD will have a process technology edge on both Intel and Nvidia for at least a few quarters, we don’t expect AMD to gather (and retain) massive share gains. CEO Lisa Su admitted the data center market takes longer to ramp new products, with the double-digit percentage unit share target likely taking at least 4-6 quarters to reach. We note the gaudy growth targets for the second half will require a strong rebound in data center spending by cloud and enterprise customers alike, consistent with Intel’s outlook. We are raising our fair value estimate for no-moat AMD to $13 per share, but we continue to view shares as overvalued.First-quarter revenue was down 23% year over year to $1.27 billion. Computing and graphics sales were $831 million, down 26% year over year primarily due to the lower non-data center GPU sales associated with the fallout of crypto-related demand. In the EESC segment, revenue was $441 million, down 17% year over year, as EPYC server CPU growth was more than offset by lower sales for game consoles. Gross margins were 41% during the quarter, up 300 basis points sequentially due to a stronger product mix. Management expects second-quarter sales to be $1.52 billion, which implies a 19% sequential rise caused by growth across all businesses.
Advanced Micro Devices is a semiconductor company. The company primarily provides x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit, chipsets, graphics processing units (GPUs), data center and personnel GPUs, and development services; server and embedded processors, semi-custom System-on-Chip products, development services and technology for game consoles. The company also licenses portions of its intellectual property portfolio. The company's segments are: Computing and Graphics, which consists of desktop, notebooks, commercial, and chipsets products; and Enterprise, Embedded and Semi-Custom, which includes server processors, and embedded P\processors products.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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