Sometimes analysts are wrong and there is a lot to like about this company's future. We were stopped out of AMD on earnings but this is a fluid environment and new products are coming.
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AMD - Advanced Micro Devices - Company Profile
Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. Its primarily offers x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and professional graphics; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles. The company provides x86 microprocessors for desktop PCs under the AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU, AMD Sempron APU and CPU, and AMD Pro A-Series APU brands; and microprocessors for notebook and 2-in-1s under the AMD A-Series, AMD E-Series, AMD C-Series, AMD Z-Series, AMD FX APU, AMD Phenom, AMD Athlon CPU and APU, AMD Turion, and AMD Sempron APU and CPU brand names. It also offers chipsets with and without integrated graphics features for desktop, notebook PCs, and servers, as well as controller hub-based chipsets for its APUs under the AMD brand; and AMD PRO mobile and desktop PC solutions. In addition, the company provides discrete GPUs for desktop and notebook PCs under the AMD Radeon brand; professional graphics products under the AMD FirePro brand name; and customer-specific solutions based on AMD's CPU, GPU, and multi-media technologies. Further, it offers microprocessors for server platforms under the AMD Opteron; embedded processor solutions for interactive digital signage, casino gaming, and medical imaging under the AMD Opteron, AMD Athlon, AMD Sempron, AMD Geode, AMD R-Series, and G-Series brand names; and semi-custom SoC products that power the Sony Playstation 4, Microsoft Xbox One, and Xbox One S game consoles. Company description from FinViz.com.
Expected earnings Jan 23rd.
Nvidia (NVDA) shares were rocked again last week after news broke that Tesla was looking at options other than Nvidia for the chips to power the autonomous driving functions. The initial headline saw AMD spike and Nvidia decline. The actual story is that AMD and Nvidia are partnering on creating a chip solution for Tesla. It is no surprise that AMD is in the mix because Tesla hired Jim Keller to lead development of Autopilot. Keller previously worked at AMD and led the development of the Zen architecture and the new Ryzen processors.
AMD announced a new embedded GPU requiring less power and capable of driving five simultaneous 4K displays. The GPU requires less than 40 watts TDP and comes in a smaller, thinner package. The chip has a 1.25 TFLOPS speed and comes in three form factors including MCM, MXM and PCI Express. The 4K and 3D support works for games, medical imaging, advertising signage and industrial uses. The GPU has 4 GB of GDDR5 memory.
AMD reported earnings of 10 cents compared to analyst estimates for 8 cents. Revenue of $1.64 billion rose 25.7% and beat estimates for $1.51 billion. Shares collapsed in afterhours after the company guided for a 12% to 18% decline in Q4 revenue to around $1.34-$1.44 billion and analysts were expecting $1.34 billion. Based on analyst expectations that lower guidance was not that bad but it is the principle of lower guidance that sends investors running for the exits.
The new CEO for AMD, Lisa Su, said in an interview last week that with 10 major product launches this year, AMD has completely restructured its product portfolio. "This shift is perhaps one of the most ambitious product ramps that has been done, certainly in AMD's lifetime."
The new Ryzen Mobile combines the best points of the Zen processor and the best of the Vega product and the most recent graphics architecture into a single product. No other company has been able to combine premium processor cores from both categories and merge them into a single chip that runs in an ultra-thin notebook.
HPQ, Lenovo and Acer have announced products that will ship this quarter in time for holiday shopping. AMD products have found new popularity in the key retailer market. Su said they had captured 50% of sales at Amazon and Newegg, the two biggest online computer marketplaces. Processor revenue rose 74% in the latest quarter. Their new AI product, MI25, is already shipping in quantity to data centers around the world and acceptance was accelerating.
I think analysts were wrong on the Q3 earnings. I believe AMD is right on the edge of a resurgence that will make the company a real competitor again.
I am using the April options to get us past their January earnings. When we exit before the event the options will still have an expectation premium.
Buy AMD shares, currently $11.12, initial stop loss $9.75.
Alternate position: Buy April $12 call, currently $1.14. No initial stop loss.
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