What To Expect From AMD’s Q1 Results?
Advanced Micro Devices stock (NASDAQ: AMD) is expected to publish its Q1 FY’23 results on May 2 reporting on a quarter that saw declining PC sales and concerns about broader technology spending by large companies. We expect the company’s revenues to come in at about $5.3 billion, in line with consensus estimates although this would mark a year-over-year decline of about 10%. We project that earnings will come in at about $0.55 per share, slightly below the consensus estimate and down by about almost 50% versus last year. See our dashboard AMD Earnings Preview for a closer look at what to expect when the company publishes results.
While AMD has been gaining market share in the x86 CPU market, steadily gaining ground over larger rival Intel in both the PC and server markets. While rival Intel faced production missteps as it had issues transitioning to the smaller, more advanced process nodes, AMD faced no such issues due to its reliance on fabrication partner TSMC. Moreover, AMD’s chips are also perceived to have a better price-to-performance ratio than Intel’s. That being said, the broader chip market has faced headwinds over Q1 as demand for PCs cools post Covid-19. For example, IDC anticipates that PC sales will drop by 10.7% this year to 260.8 million units, a downward revision from its previous forecast. While sales of AMD’s EPYC server processors have risen recently, the business could face some pressure in Q1 as customers work through inventory built up in recent quarters, while also becoming a bit more cautious about spending due to economic headwinds.
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Now, is AMD stock still a buy at the current market price of about $88 per share? We think AMD’s valuation at the current juncture appears a bit rich. AMD stock trades at about 30x consensus 2023 earnings. Moreover, the company’s top line is likely to see little to no growth this year amid continued pressure on the client side of the business. Longer-term growth in the PC market is also likely to remain muted, with growth between 2023 and 2027 projected at an average annual rate of 2.9%.  Moreover, while AMD has a strong presence in the GPU space, its rival Nvidia’s chips are generally perceived to be more advanced and capable, when it comes to AI-related workloads. This could limit the upside for the company in the AI market. We value AMD stock at about $72 per share, which is about 18% below the current market price. See our analysis on AMD Valuation: Is AMD Stock Expensive Or Cheap? for more details on what’s driving our price estimate for AMD. Also, check out our analysis of AMD Revenue for more details on the company’s key revenue streams.
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