AMD Profits: Are Data Center Owners “Taking In” or Just Not Buying Intel Chips?

Advanced Micro Devices Inc.’s earnings will serve as an indication of whether the data center market is truly in a “digest” phase, as reported by Intel Corp. AMD AMD, + 3.20% is scheduled to report its first quarter earnings. on Tuesday after the markets close. When Intel INTC -0.81% reported results last week, the market share leader noted that the market was bottoming out from a “digest phase” as its data center sales fell 20% year-on-year. anus.

However, analysts questioned that characterization of a “digestion phase,” instead wondering if AMD was taking Intel’s stake. Without naming names, Intel fired a salvo on the arcs of AMD and Nvidia Corp. NVDA, + 1.39% when it came to the competitive data center market with Intel CEO Pat Gelsinger promising to “fight for every socket in the market” . Wall Street, on average, expects AMD to report $ 1.3 billion in enterprise, embedded and semi-custom sales, the segment containing data center chips and game consoles, nearly triple the $ 348 million the company reported. in the same period of the previous year. Low revenue last year was attributed to weak console sales with next-gen consoles on the horizon, but AMD does not separate data center sales from game sales. All of this comes amid a continuing shortage of microchips to meet demand from global industries, and the companies that make the silicon wafer chip designs are working to clear waiting lists that span several months. Read: Semiconductor shortage is here to stay, but it will affect chip companies differently AMD said in its latest earnings report that it expected data center and gaming sales growth to continue well into 2021. It will forecasts that AMD will report $ 1.89 billion in computing and graphics sales, a relatively modest 31% increase over the prior year. In early April, shareholders of AMD and Xilinx Inc. XLNX, + 3.32% approved a $ 35 billion close between the two companies. In March, the company announced a new game card. What to Expect Earnings: Of the 34 analysts surveyed by FactSet, AMD is expected to post, on average, adjusted earnings of 44 cents per share, down from 35 cents per share expected at the beginning of the quarter and 18 cents per share reported in the same period of the previous year. Estimize, a software platform that obtains collective estimates from hedge fund executives, brokerages, buying analysts and others, demands earnings of 48 cents a share. Revenue: In January, AMD predicted first-quarter sales between $ 3.1 billion and $ 3.3 billion, while analysts on average had forecast revenue of $ 2.68 billion at the time. Now, 31 analysts, on average, are expecting revenue of $ 3.18 billion, up from the $ 1.79 billion reported in the prior-year quarter. Estimize expects revenue of $ 3.25 billion. Stock movement: In the first quarter, AMD shares fell 14.4%. In contrast, the PHLX Semiconductor Index SPX, + 0.18%, gained 11.8%, the S&P 500 SPX Index, + 0.18%, gained 5.8%, and the Nasdaq Composite Index COMP, high-tech, + 0.87% was up 2.8%. Susquehanna Financial analyst Christopher Rolland, who has a positive rating and a $ 115 price target at AMD, said PC and graphics processing unit controls point to continued strong demand in the first quarter. “While many believe that the advantage is limited by capacity constraints, we believe that AMD is rapidly becoming [Taiwan Semiconductor Manufacturing Co.’s
TSM,
+2.43%
] preferred ‘CPU’ partner as Intel’s IDM 2.0 strategy looks increasingly competitive for the foundry, ”said Rolland. “So we wouldn’t be surprised to see AMD receive more than enough wafers to track toward targeting for the full year and perhaps beyond.” Morgan Stanley analyst Joseph Moore, who just reset estimates for AMD, said he expects solid earnings above the AMD consensus with “strong demand across the board and supply constraints due to substrates and to a lesser extent measure, to wafers “. Moore expects a fabulous priority to continue betting on high-margin products like servers and “enthusiastic desktop microprocessors” and “lower-margin customers that are strategic and single-origin” like MSFT from Microsoft Corp., + 0.15% and Sony Group Corp. 6758, -1.18% game consoles. “Since competitors also face supply constraints, overall prices should be healthy,” Moore said. Analysts expect taxable AMD earnings of $ 2.04 per share in 2021, $ 2.59 per share in 2022 and $ 2.90 per share in 2023, while analysts surveyed by FactSet expect earnings per share of 1.95. dollars, 2.51 dollars and 3.23 dollars, respectively. B of A Securities analyst Vivek Arya, who has a price target of $ 100, said of the larger chip market that “supply constraints could limit the outperformance of the first quarter / the outlook for the second quarter, but extend the cycle to year 22 “. Will TSMC exceed its already strong 37% YoY sales outlook for CY21 while firmly convincing investors of INTC stock earnings? Of the 36 analysts covering AMD, 21 have buy ratings or overweights, 12 have hold ratings and three have sell ratings, with an average price target of $ 100.50.