Investors Not Sure Which Way to Go on AMD After Earnings

Advanced Micro Devices Inc. (NYSE: AMD) reported third-quarter 2019 earnings after markets closed Tuesday. The chipmaker posted adjusted diluted earnings per share (EPS) of $0.18 on revenues of $1.8 billion. In the same period a year ago, the company reported EPS of $0.13 on revenues of $1.65 billion. Third-quarter results also compare to the consensus estimate for EPS of $0.18 on $1.81 billion in revenues.

AMD stock is up about 35% so far this year and has nearly doubled in the past 12 months. Third-quarter results are unlikely to move the needle much in either direction.

In its computing and graphics segment, AMD reported revenue of $0.28 billion, up 36% both year over year and sequentially. The year-over-year increase was attributed to client sales of the company’s Ryzen desktop process while sequential improvement was due to sales of both desktop and mobile chips. Operating income rose from $100 million in the year-ago quarter and $22 million in the second quarter to $179 million.

In the enterprise, embedded and semi-custom segment revenue totaled $525 million, down 27% year over year and 11% sequentially. The declines were primarily due to lower semi-custom product revenue, partially offset by higher EPYC processor sales.

For the fourth quarter, AMD expects revenue of around $2.1 billion, plus or minus $50 million, an increase of approximately 17% sequentially and 48% year-over-year. The sequential increase is expected to be driven by growth across all businesses. The increases are being driven by sales of Ryzen, EPYC and Radeon products. AMD expects adjusted gross margin to be approximately 44% in the fourth quarter of 2019, up from 43% in the third quarter.

The company’s CEO, Dr. Lisa Su, said:

Our first full quarter of 7nm Ryzen, Radeon and EPYC processor sales drove our highest quarterly revenue since 2005, our highest quarterly gross margin since 2012 and a significant increase in net income year-over-year. I am extremely pleased with our progress as we have the strongest product portfolio in our history, significant customer momentum and a leadership product roadmap for 2020 and beyond.

Analysts had forecast fourth-quarter earnings at $0.31 per share and revenues at $2.15 billion. For the full year, revenues were seen at $6.78 billion (about 4.7% higher than 2018 revenues) and EPS was forecast at $0.63. AMD’s slightly lower revenue forecast may be sending investors for the exits. Sell the news, and all that …

AMD’s shares closed at $33.03 on Tuesday, down nearly 2% for the day, and slipped another 2% in the after-hours trading session, to trade at $32.35. At last look, the shares traded only 0.7% lower at $32.80. The stock’s 52-week range is $16.03 to $35.55. The consensus price target for the shares was $33.54 before the report.