Why Did Advanced Micro Devices, Inc. Stock Plunge Today?
Oct 25, 2018 by InvestorDestination Team
Investors’ enthusiasm for AMD (NASDAQ: AMD) crashed after the company announced its 3rd quarter results on Wednesday. In the 3rd quarter, the company generated 1.65B and achieved 4% YOY growth. Its gross profit has improved, 40% this year compared to 36% for the 3rd quarter of the previous year. Its EPS is 0.09 vs. the previous year’s 0.06. However, the stock plunged 15%.
In the second quarter, the company achieved 53% revenue growth, and now its revenue and earnings declined sequentially, and the company blames that on weakness in its graphics business. Its next quarter revenue estimate is also lower than the third quarter’s.
Investors’ enthusiasm for its stock was driven by its exposure to blockchain along with its turnaround story; however, the company has repeatedly downplayed its exposure to blockchain. During last year’s third quarter, the company generated high single-digit revenue from blockchain, but this quarter it is negligible .
While achieving more than 50% revenue growth consistently is not sustainable, the company is making progress in its turnaround effort. For example, it is continuing its margin expansion and momentum for its new products.
Its client and server businesses are doing well. It is building momentum for its new product Ryzen and EPYC processors.
Its client processor is making progress in a wide variety of end markets from mobile to desktop. It is building design wins for these products and is on track for an even more extensive assortment of AMD-powered notebooks in 2019.
In the server business, it is getting more traction with its EPYC products, especially in the cloud.
In the GPU side, the company is happy with datacenter and OEM but had to deal with softness in the channel. The company didn’t mention any structural changes but instead blames excessive channel inventory on the basics of economics, supply, and demand and expect this to persist for a few more quarters.
The company benefited from Intel’s supply constraints. So, analysts are wondering whether its gain in market share due to competitor’s problem might disappear. Now, the market’s exuberance for its stock might have dampened a bit.
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