Advanced Micro Devices Inc. has served as a bellwether in chip-sector earnings of late, usually playing the foil to Intel Corp.’s report, so analysts will keep a sharp eye on how the company expects 2022 to play out when AMD reports earnings Tuesday.
Front and center is how AMD has fared amid contracting sales of personal computers, given that strong sales a year ago fueled by COVID-19 work-from-home mandates boosted results. The big growth area is expected to come from AMD’s data-center sales, where the chipmaker continues to capture market share from Intel.
So far, the chip sector has been handing in mixed results. Intel Corp. doubled down on its bullish 2022 outlook even though the current quarter is showing signs of weakness and Wall Street is skeptical. Qualcomm Inc.’s QCOM outlook was also bullish, but analysts could see support in the short term given strength in its handset business. Texas Instruments Inc. execs played it safe in issuing a cautious outlook because it expects supply-chain problems exacerbated by COVID lockdowns in China to affect the manufacturing operations of its customers. Chip-equipment makers Lam Research Corp. LRCX, KLA Corp. and ASML Holding NV all reported that supply-chain problems are hampering sales in a high-demand environment.
For the past several quarters, AMD has turned in beat-and-raise earnings, but last quarter its full-year forecast was a little on the cautious side. That caution appeared to play well with the events that unfolded during the quarter — rising inflation, declining PC sales, a stronger dollar DXY, COVID lockdowns in China that are only worsening supply chain problems, and the heightened geopolitical risk from Russia’s invasion of Ukraine.
With all that staring the sector down, Raymond James analyst Chris Caso recently upgraded AMD to a “Strong Buy” from “outperform” with a price target of $160. In a note, Caso said he expects the chip maker to keep bleeding share from Intel, and that the two will “become a sustained duopoly over time” in the PC market.
“As we have become more concerned about cycle risks given potential for slowing consumer demand and elevated inventory levels at customers, we favor those semi companies with strong secular drivers, more muted cyclical exposure and attractive valuations, for which AMD appears well positioned,” Caso said. “We have strong confidence regarding AMD’s position and share gains in the datacenter market.”
Last quarter, AMD turned in another strong print and rocketed past Wall Street expectations, and in the one before that analysts had trouble nitpicking results.
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