Will Weaker Than Expected Numbers Lead To A Drop In AMD’s Share Price Post Earnings Release?

by Trefis Team
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Advanced Micro Devices (NASDAQ: AMD) is slated to release its Q4 and full-year 2019 results on January 28, 2020. For FY 2019, Trefis estimates that the company will report revenues of $6.87 billion (vs. consensus estimate of $6.71 billion) slightly higher than $6.47 billion in 2018, due to an equal rise in both segments. The company is expected to report EPS of $0.59 (vs. consensus estimate of $0.62), higher than the $0.34 in 2018, due to revenue growing at a higher rate than expenses.
However, we believe that weaker-than-expected earnings for FY 2019 will very likely result in AMD’s stock falling in price once earnings are announced. In fact, our forecast indicates that AMD is valued at $45.40 a share, which is roughly 11% below its current price of $51.24.

Trefis shines the spotlight on key assumptions and data for AMD, and our hypothesis lays out one possible set of expectations. You can chime in with your own expectations for AMD’s FY19 earnings in our interactive dashboard.

A] Revenues are expected to marginally beat consensus estimates

  • Trefis estimates AMD’s 2019 revenues to be $6.87 billion, higher than the consensus estimate of $6.71 billion.
  • Revenue is expected to rise 6% from $6.47 billion in 2018 to $6.87 billion in 2019.
  • An equal rise in Computing & Graphics revenue and Enterprise, Embedded & Semi-Custom revenue, is expected to drive a $400 million rise in AMD’s total revenue for 2019.

A separate interactive dashboard for AMD provides an in-depth view of AMD’s revenue trend and segment-wise revenue performance, along with the forecast for 2019.

B] EPS likely to miss consensus estimate

  • AMD’s 2019 earnings per share (EPS) is expected to be $0.59 per Trefis analysis, ~5% lower than the consensus estimate of $0.62 per share.
  • EPS is expected to increase 73.5% from $0.34 in 2018 to $0.59 in 2019.
  • We forecast AMD’s expenses to rise marginally in 2019, at a rate slower than the rise in revenue.
  • This will result in a ~1.7x growth in AMD’s Net Income Margin figure from 5.2% in 2018 to 8.7% in 2019.

C] Stock price estimate ~11% lower than the market price

  • A trailing P/E multiple of 76.9x looks more appropriate for AMD’s stock, as opposed to the current implied P/E multiple of 82.6x.
  • Trefis’ forecast for AMD’s 2019 earnings as well as P/E multiple, are slightly lower than market expectations, working out to a fair value of $45 for AMD’s stock as opposed to the current market price of around $51.

Additionally, you can input your estimates for AMD’s key metrics in our interactive dashboard for AMD’s FY19 earnings and see how that will affect the company’s stock price.

 

See all Trefis Price Estimates and Download Trefis Data here

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