How Did AMD Fare In 2018, And How Much Can Its Earnings Grow In 2019?

AMD’s (NYSE:AMD) revenue grew in the mid-twenties percent to $6.5 billion in 2018. This can be attributed to strong demand for the company’s Ryzen processors, which led to a double-digit pricing and volume growth for the Computing & Graphics segment. Enterprise, Embedded & Semi Conductor segment saw low single-digit revenue growth, primarily led by higher EPYC processor sales. Adjusted EBITDA more than doubled to $803 million, led by margin expansion of over 500 basis points. Better pricing, low expense growth, and higher revenues fueled the surge in EBITDA. Looking forward, the company will likely see high single-digit revenue growth in 2019, led by continued growth in Ryzen, Radeon and EPYC products, along with its new 7nm chips. We have created an interactive dashboard ~ How Did AMD Fare In 2018, And What Can We Expect In 2019? You can adjust various drivers to see the impact on the company’s adjusted earnings and share price estimate. In addition, here is more Information Technology data.

Revenues Will Likely Grow In High Single-Digits In 2019

AMD’s revenue growth in 2019 will likely be led by a continued ramp up in Ryzen, Radeon, and EPYC products sales. The company of late has seen strong market share gains in desktops, notebooks, and server markets. This can be attributed to the performance of these products at a relatively cheaper price point, when compared to Intel’s offerings. In terms of features, Ryzen offers 8 cores with 16 threads, while Intel’s Core i7 9700K does not offer thread doubling. Several reviews, including that for gaming, have placed AMD’s Ryzen over Intel, primarily for cost-effectiveness.  In GPUs Intel has performed better in the recent quarters. However, the overall GPU market is also impacted by a decline in crypto mining, and the foreign tariffs. In server market, AMD’s market share gains have been strong. In fact, it grew from less than 1% toward the end of 2017 to over 3% in 2018. The company expects to gain further market share with its EPYC processors. AMD’s EPYC processors are single socket design processors, which can deliver better performance than many dual processor servers, and it costs less when compared to the offerings from Intel. Note that performance and reviews vary from individual product to product. AMD will also ramp up its 7nm chips in 2019, and it will bolster the overall sales growth. However, the contribution from 7nm chips is expected to be much higher in 2020. 7nm chips are AMD’s next generation chips, and the company last month unveiled its first 7nm Radeon GPU. It will further expand the 7nm offerings to Ryzen and EPYC products as well.

Looking at margins, gross margins improved 440 basis points, while adjusted EBITDA margins were up over 500 basis points in 2018. This can be attributed to better pricing, and controlled expenses. The company expects its adjusted gross margins to improve by another 200 basis points in 2019, led by the mix of its Ryzen, Radeon and EPYC products. We currently forecast a 250 basis points improvement in adjusted EBITDA margins, which will translate into EBITDA of a little over $1 billion. The bottom line will likely grow in high forties percent to $0.65 per share on an adjusted basis. Our price estimate of $22 for AMD is based on a 33x forward price to earnings multiple.

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