AMD stock on track for best day in more than a year, but doubters remain

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Advanced Micro Devices Inc. reported a blowout quarter on Wednesday afternoon, but it wasn’t sufficient to make some Wall Street analysts change their minds.

Skeptical analysts largely remained essential following the report, in which AMD

AMD, +11.59%

 beat revenue and earnings expectations and delivered a second-quarter sales outlook that got here in above estimates. Investors cheered the information, sending shares up as a lot as 15% in Thursday morning buying and selling and placing them on track for the best day in over a yr.

Despite the constructive report, no analysts modified their rankings of AMD on Thursday, and of the 4 worth goal adjustments, two had been in the damaging path, in accordance with FactSet. And one of many two to extend a goal didn’t precisely give a glowing assessment.

Susquehanna analyst Christopher Rolland, whose March downgrade of AMD doubtless prompted a company response, wasn’t bought on the newest numbers. “We view the quarter as incrementally constructive (Ryzen/Epyc commentary), but the risks surrounding an Ethereum-related GPU hangover in 2H18 remain ‘under-addressed,’” Rolland wrote Thursday.

There’s concern amongst traders that crypto-mining income will fall amid volatility in the cryptocurrency market in addition to a transfer to new mining choices reminiscent of application-specific built-in circuits, or ASICs, for cash like ether

ETHUSD, -0.69%

AMD’s administration mentioned Wednesday that the corporate generated 10% of revenue from blockchain-related enterprise in the primary quarter, with expectations for a “modest decline” subsequent quarter. Rolland, nonetheless, believes that executives “are grossly underestimating mining GPU purchases through the retail channel” and estimates that AMD really generated 23% of income from cryptocurrency mining.

See additionally: AMD is a different company than it was just two years ago

Rolland “modestly” elevated his AMD worth goal to $eight from $7.50 because of better-than-expected commentary on Ryzen and Epyc chips, but he stored his damaging ranking intact.

J.P. Morgan analyst Harlan Sur stayed on the sidelines after the report and lowered his goal to $13 from $16. He pointed to a variety of encouraging indicators, together with the corporate’s prospects for “broad-based” income development going ahead as each Ryzen CPUs and Epyc server CPUs are exhibiting momentum. He additionally likes the corporate’s gross-margin outlook of about 37%, which got here in above Wall Street’s expectations for about 36%.

Still, Sur is worried in regards to the aggressive setting. “We expect the competitive front to remain challenging and believe AMD will need to invest meaningfully in engineering resources as it attempts to keep pace with the market leaders, which is dampening earnings power expansion,” he wrote. “While we expect AMD to regain modest CPU/GPU share and drive significant top-line growth this year, we are less certain on longer-term share gains.”

AMD’s robust quarter buoyed shares of Nvidia Corp.

NVDA, +2.78%

up three.2%, and Intel Corp.

INTC, +1.69%

up 2.6%.

Optimistic analysts, in the meantime, noticed more causes for optimism, together with Stifel’s Kevin Cassidy, who raised his worth goal on the stock to $14 from $13.

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“Management increased 2018 total revenue growth to be mid-20%, up from double digits and gross margin to be over 37%, up from previous estimate for over 36%,” wrote Cassidy, who has a purchase ranking on shares. “We continue recommending the AMD shares for the potential upside to estimates driven by adoption of Epyc server CPUs in 2H18.”

Despite Thursday’s features, AMD shares are down 17% over the previous 12 months, whereas the S&P 500

SPX, +0.81%

 has gained 11%. Of 30 analysts tracked by FactSet, 12 have the equal of a purchase ranking on the stock, 12 fee it a maintain, and 6 name it the equal of a promote. The common worth goal as of Thursday morning was $13.68.

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