Technology

Earnings Previews: Microsoft, Alphabet, AMD

The five largest U.S. traded companies report June quarter earnings this week beginning Monday evening with Tesla. We previewed expectations for GE, Raytheon, Tesla, 3M and UPS last Friday, and we also had a look at what to look for from Apple, Starbucks and Visa. We will cover several more over the next few days.

By the end of this week, we shall have seen results from the five FAANG stocks. Here’s a preview of what to expect from three top tech companies reporting quarterly results after markets close on Tuesday.

AMD

Advanced Micro Devices Inc. (NASDAQ: AMD) stock has risen more than 49% in the past 12 months, including a modest improvement of just 0.5% for the year to date. The chipmaker’s stock price doubled in 2020 with virtually all the gain coming in the second half of the year.

New PlayStation 5 and Xbox gaming consoles drove revenues for AMD, and a coming handheld gaming device from Valve will be powered by semi-custom AMD CPUs and graphics processors. Valve’s Steam Deck represents AMD’s entry into the handheld market, and the device is expected to perform well against Nintendo’s Nvidia-powered Switch.

Of 39 surveyed analysts covering AMD stock, 22 rate the shares a Buy or Strong Buy and 15 have put a Hold rating on the stock. At a recent price of around $92.20, the implied upside to a median price target of $105 is nearly 14%. At the high price target of $135, the upside potential is around 46%.

AMD is expected to post second-quarter revenue of $3.61 billion, up 4.6% sequentially and 87% higher year over year. Adjusted earnings per share (EPS) are forecast to rise by two cents sequentially to $0.54, triple EPS of $0.18 in the same quarter last year. For the full year, current estimates call for EPS of $2.17, up 68% year over year, on revenue of $14.7 billion, which would be a gain of 51%.

AMD’s stock trades at 42.5 times expected 2021 EPS, 34.2 times estimated 2022 earnings and 27.5 times estimated 2023 earnings. The stock’s 52-week range is $67.02 to $99.23. AMD does not pay a dividend.

Alphabet

After the blistering results posted last week by Twitter and Snap, concerns about advertising revenue have been put to rest. Alphabet Inc. (NASDAQ: GOOGL), which derives more than 80% of its revenue from ads on its Google search engine, is likely to post a sharp increase as well. The company has added 70% to its share price over the past 12 months, including a jump of 52% so far in 2021. That year-to-date gain is tops among the FAANG stocks.

A whopping 43 of 45 analysts covering the stock have a Buy or Strong Buy rating on the shares, and the two holdouts rate the stock a Hold. At a trading price of $2,660.30, the upside potential based on a median price target of $2,837.50 is about 6.7%. At the high price target of $3,350, upside potential reaches nearly 26%.