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AMD earnings hit the target, but trimmed annual forecast sends stock down

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Advanced Micro Devices Inc. shares fell in the extended session Tuesday after the chip company admitted that the COVID-19 pandemic would trim its growth in 2020.

AMD
AMD,
-1.73%

reported first-quarter net income of $162 million, or 14 cents a share, compared with $16 million, or a penny a share, in the year-ago period. After adjusting for stock compensation and other factors, AMD reported earnings of 18 cents a share, compared with 6 cents a share in the year-ago period. Revenue rose to $1.79 billion from $1.27 billion in the year-ago quarter.

Analysts surveyed by FactSet had forecast adjusted earnings of 18 cents a share on revenue of $1.78 billion. For the second quarter, AMD expects revenue of $1.75 billion to $1.95 billion, in line with the average analyst estimate of $1.88 billion.

The company, which has not rescinded annual guidance like many others have, decreased its expectations for 2020 sales, and now expects revenue to grow 20% to 30% from 2019, after previously projecting 28% to 30% revenue growth. The company maintained its guidance for adjusted gross margin of 45%.

Shares fell more than 4% after hours, following a 1.7% decline in the regular session to close at $55.51. In comparison, the PHLX Semiconductor Index
SOX,
-0.68%

fell 0.7%, the S&P 500 index
SPX,
-0.52%

declined 0.5%, and the tech-heavy Nasdaq Composite Index
COMP,
-1.40%

sank 1.4%.

AMD has yet to ease up on its release of new chips this year, with the recent launch of consumer desktop chips in its third-generation Ryzen line, and three new Epyc-branded processors for the database, commercial high-performance computer and hyperconvergence markets. Some analysts have cautioned of a possible drop-off in chip sales brought on by recessionary concerns, but so far the sector has benefited from millions of people having to work and entertain themselves from home because of the coronavirus pandemic.

“While we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets,” Chief Executive Lisa Su said in Tuesday’s announcement.

AMD reported a 73% increase from last year in computing and graphics chip sales to $1.44 billion, while analysts expected a 58% surge to $1.31 billion. The company also reported a 21% decline in enterprise embedded and semi-custom chip sales — the unit that includes data-center and gaming-console chips — to $348 million, while analysts expected a 4% rise to $458.7 million.

Of the 40 analysts who cover AMD, 18 have overweight or buy ratings, 19 have hold ratings, and three have sell ratings, with an average price target of $50.21, according to FactSet data.



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