by Ian Harvey
February 14, 2020
AMD continues to blast upwards with prospects for more market share gains, particularly after the upcoming analyst day.
Meantime, Stock Options Made Easy Members Have Made Potential Profits Of 431%, 129%, 94%, 128% and 129% on AMD Option Calls So Far This Year!
The Santa Clara, Calif.-based company Advanced Micro Devices, Inc., a global semiconductor company, beat earnings estimates on January 28, but weak guidance saw the stock slumping before it recovered. The stock slipped to $46.10 on January 29 on post-earnings weakness but then stabilized, hitting a high of $55.03 yesterday, February 13.
In the fourth quarter, AMD had 17% share of the PC processor market, up from 13.5% a year earlier. It had 18.3% market share in desktop processors, up from 15.9% a year earlier. Its share of notebook processors was 16.2%, up from 12.2% a year earlier.
AMD is likely to continue to take market share from rival Intel in the year ahead, RBC Capital Markets analyst Mitch Steves said Tuesday.
Steves reiterated his outperform rating on AMD stock and raised his price target to $63 from $53.
"We think share gains in PCs will continue to move into the mid-20% market share range and we have higher conviction in server units in both 2020 and 2021," Steves said in a note to clients.
"We remain bullish on AMD due to notable catalysts in 2020, which include the upcoming analyst day on March 5th," Steves said. "We think this will be an important event."
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In the short term, one big headwind was AMD’s first-quarter revenue guidance of $1.75 billion to $1.85 billion while analysts had forecast $1.86 billion. AMD blamed soft console sales ahead of Sony Corp. and Microsoft Corp. rolling out new consoles later in the year. For the year, AMD’s forecast of a 28% to 30% rise in revenue, versus the Street’s forecast of 28%, hinged on an improvement in the second half of the year.
AMD's results reflected a clean beat and a bit weaker guidance for the first quarter. Strength in EPYC server CPUs were offset by weaker consoles ahead of new platforms and seasonal PC CPUs.
The 2020 sales growth guidance of 28-30% reflects expectations that the company will gain share again. CEO Lisa Su's huge Street credentials and Intel's 2020 guidance that calls for decelerating sales throughout the year render AMD's guidance as reasonable and achievable.
There appears to be significant upside for 2021/22, which makes this the AMD multi-year share-gain, dollar content gain CPU/GPU compute story that deserves a higher P/E multiple.
Momentum in Ryzen, Radeon and EPYC processors remains a key catalyst.
In the high-end desktop market, the company is banking on growing clout of its third-generation Ryzen Threadripper processor.
Moreover, Ryzen 4000 mobile processors powered laptops from ASUS, Acer, HP, Dell, Lenovo and other major OEMs, slated for release in 2020, are expected to help AMD in expanding presence in the commercial market.
AMD had unique products catering to both the low end and high end of personal computers, therefore.....
Expect a gross profit margin target in the high 40% range,
Also, AMD will outline a path to 30% market share in server central processing units, and
It is likely that AMD will imply 2021 earnings well north of $2 a share, vs. the current estimate from analysts at $1.58.
Analysts’ Positivity Regarding AMD.....
Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $58 from $56, called the outlook “conservative” and said that the company’s March 5 analyst day should be a catalyst for the stock. Lipacis feels sales of the company’s data-center Epyc chip still has a way to go.
“We expect server share gains to accelerate as cloud customers become more familiar with Epyc,” Lipacis said.
As well, Cowen analyst Matthew Ramsay, who has an outperform rating and a $60 price target, said “not much fundamentally changed” with AMD other than the soft console sales.
“While 1Q20 came in light due entirely to console seasonality, 2020 guidance should allow investors to feel comfortable with upside to consensus,” Ramsay said. “Importantly, we believe the guidance sets the table for upward revisions throughout the year with notebook & console the largest potential upside drivers, while server growth will be of the highest magnitude.”
Also, Summit Insight Group analyst Kinngai Chan upgraded shares of AMD from Hold to Buy.
The analyst expects gross margin expansion to accelerate through 2020 due to a higher contribution from its Server/data center business.
"While the risk of Intel price aggression remains, we believe AMD's design wins in the server/datacenter has hit a critical mass and should give AMD plenty of gross margin leverage through 2020," Chan wrote in a note.
Wedbush analyst Matt Bryson reiterated an Outperform rating and hiked the price target from $51.50 to $75. Although trimming its estimates to match AMD's guidance, Wedbush raised its 2021 numbers, assuming more EPYC sales – a result it feels will create a more favorable growth and margin profile for the year.
The question remains......Is It Too Late To Get In On These AMD Options Trades?
Will AMD Continue To Move Up?
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!