Investors Shed AMD Stock After Soft Outlook

Paul Ausick

Advanced Micro Devices Inc. (NYSE: AMD) reported fourth-quarter and full-year 2019 earnings after markets closed Tuesday. For the quarter, the chipmaker posted adjusted diluted earnings per share (EPS) of $0.32 on revenues of $2.13 billion. In the same period a year ago, the company reported EPS of $0.08 on revenues of $1.42 billion. Fourth-quarter results compare to the consensus estimate for EPS of $0.31 on $2.11 billion in revenues.

For the full year, EPS totaled $0.64 and revenues came in at $6.73 billion compared to 2018 totals of $6.48 in revenues and EPS of $0.46. Analysts were looking for EPS of $0.62 and revenues of $6.71 billion.

AMD stock is rose by 155% in 2019. Quarterly and annual results could indicate that last year’s soaring growth is coasting to a halt..

In its computing and graphics segment, AMD reported revenue of $1.66 billion, up 69% year over year and up 30% sequentially, driven primarily by strong sales of Ryzen processors and Radeon gaming GPUs. Operating income rose from $115 million in the year-ago quarter and $179 million in the second quarter to $360 million.

In the enterprise, embedded, and semi-custom segment revenue totaled $465 million, up 7% year-over-year and down 11% sequentially. The annual increase was driven by significantly higher EPYC™ processor sales, partially offset by lower semi-custom sales. The sequential decline was attributed to lower semi-custom sales, partially offset by strong EPYC processor sales.

For the first quarter, AMD expects revenue of around $1.8 billion, plus or minus $50 million, a decrease of approximately 17% sequentially and an increase of about 42% year-over-year. The sequential decrease is driven primarily by negligible semi-custom revenue which continues to soften in advance of the ramp of next-generation products, in addition to seasonality. The year-over-year increase is being driven by strong growth of Ryzen, EPYC, and Radeon product sales. AMD expects non-GAAP gross margin to be approximately 46% in the first quarter of 2020.

The company’s CEO, Dr. Lisa Su, said:

2019 marked a significant milestone in our multi-year journey as we successfully launched and ramped the strongest product portfolio in our 50-year history. We delivered significant margin expansion and increased profitability as we gained market share with our Ryzen and EPYC processors. Our focused execution and the investments we made in our high-performance computing roadmaps position us well for continued growth in 2020 and beyond.

Analysts had forecast first-quarter earnings at $0.20 per share and revenues at $1.86 billion. For the full year, revenues are seen at $6.71 billion and EPS is forecast at $1.13. AMD’s slightly lower revenue forecast is chasing investors away.

AMD’s shares closed at $50.53 on Tuesday, up about 2.6% for the day but slipped about 2.9% in the after-hours trading session, to trade at $49.09. The stock’s 52-week range is $19.05 to $52.81. The consensus price target for the shares was $43.33 before the report.