When chip designer Advanced Micro Devices reports earnings after the closing bell on Tuesday, investors expect a 266% increase in earnings per share and nearly doubling in revenue.
Amid chip shortages crippling the global economy, investors have high hopes for semiconductor companies.
(ticker: AMD), the company’s ability to meet high expectations may be due to its data center chip revenues. That data center market offers AMD plenty of opportunities, after the delay in the launch of a new advanced server chip from rival
Jefferies analyst Mark Lipacis wrote that, according to his team’s industry audits, AMD’s Milan server chips will take a significant chunk of Intel’s market share in the second half of the year.
AMD executives have consistently issued bullish guidance. In April, the company predicted that second quarter revenue would increase by 86%, to about $3.6 billion. Analysts are currently forecasting adjusted second-quarter earnings of 54 cents a share on revenue of $3.6 billion.
Wall Street expects AMD to reach $2.2 billion in computing and graphics revenues and $1.4 billion in enterprise, embedded and semi-custom revenues. The company’s semi-custom business includes chips designed for new video game consoles sold by
AMD has previously said it expects full-year 2021 revenue to grow by about 50% from last year.
AMD’s growth potential could be limited by difficulties in obtaining materials and components needed to make chips, as well as obtaining additional capacity from its contract manufacturers, including
Taiwan semiconductor manufacturing
(TSM). BMO Capital Markets analyst Ambrish Srivastava wrote that data center demand could be hurt by shortages of components and some materials needed to manufacture chips.
With AMD stock trading at high multiples of 42 times earnings estimates for the next 12 months, Srivastava said the company should beat Wall Street expectations by a “meaningful” amount and renew its full-year expectations increase to get the share higher. .
AMD has reported better-than-expected earnings per share for the past four quarters. It has missed revenue estimates only once in the past two years.
Excessive expectations and bullish predictions from executives haven’t done much to help AMD’s stock lately. After rising in 2020, AMD stocks are flat this year, while the
PHLX Semiconductor Index
increases by 17%.
Among Wall Street analysts covering AMD, 25 rate the stock on Buy, 15 on Hold and three on Sell. The average target price is $102.35, 11% above a recent close of $91.82.