| | | AMD's weak guidance gets pass as Wall Street looks to AI sales ramp
Nov. 01, 2023 10:17 AM ET
By: Chris Ciaccia, SA News Editor
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Even as AMD (NASDAQ: AMD) offered up weaker-than-expected guidance for the fourth-quarter due to slowdowns in its embedded and gaming segments, Wall Street came to its defense after the chipmaker offered up some positive signs for its coming artificial intelligence chip.
On the earnings call, Chief Executive Dr. Lisa Su said the company expects more than $2B in revenue next year from its MI300 chip.
"This growth would make MI300 the fastest product to ramp to $1 billion in sales in AMD history," Dr. Su said on the call. She added the company will have more to say about the chip at its event in December.
AMD ( AMD) shares erased pre-market losses and gained nearly 5% in early trading on Wednesday.
Looking ahead, AMD ( AMD) expects fourth-quarter revenue to be around $6.1B, plus or minus $300M, and below the $6.4B estimate. Gross margins are forecast to be around 51.5%, below the 52.1% estimate.
Citi analyst Christopher Danely, who reiterated his buy rating and $136 price target on AMD ( AMD) after the results, called the visibility into the MI300 ramp a "Halloween treat." Danely added that AMD reiterated its expectation that its data center segment will grow 50% in the second-half of 2023 compared to the first-half of 2023.
Baird analyst Tristan Gerra said the company is "on the right track" with its AI ramp and further share gains likely due to its software ecosystem, while also suggesting that its EPYC server CPUs could take share from competitors, which include Intel ( INTC) and Nvidia ( NVDA).
"Net, strong execution and resilient business model in the context of a weakening macro lead us to reiterate our Outperform rating," Gerra wrote in a note to clients.
Morgan Stanley analyst Joseph Moore said that AMD has "faced some of the biggest headwinds in history in PCs, then servers, now programmable logic," but with all of that reflected, a recovery in every segment should start to happen. When coupled with the larger-than-expected revenue from AI, the firm kept its overweight rating, though it tweaked its price target to $128 from $138.
Bank of America analysts, led by Vivek Arya, reiterated their neutral rating and $120 price target, said they like the company's "computing neighborhood," as well as execution, solid start to generative AI sales and server share gains taken from Intel ( INTC). However, overall sales growth of around 15% year-over-year for 2024 is a bit below expectations of around 20%, even when taking the incremental $1.6B in AI sales into account.
"AMD stock is now trading 28x/24x our/consensus pf-PE for CY24E, which is at or above NVDA’s 24x PE, despite the latter’s faster growth prospects," the analysts wrote. |
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