AMD share price soars due to strong sales forecast

By Bloomberg | 30 Jan 2019 at 08:50hrs
AMD
Advanced Micro Devices Inc., the second-largest maker of computer processors, reported fourth-quarter profit that met analysts' estimates and gave a rosy outlook for 2019 revenue, relieving concerns that the chipmaker would fare worse after rivals' disappointing results.

Profit excluding certain items was 8 cents a share, matching the average of analyst projections compiled by Bloomberg. For 2019, revenue will rise at a percentage in the high single digits, the Santa Clara, California-based company said Tuesday in a statement. That compares with predictions for sales to increase 6 percent. Shares climbed as much as 11 percent in late trading.

Advanced Micro Devices' reassuring annual outlook follows less optimistic projections in recent days from semiconductor makers Intel Corp. and Nvidia Corp. Under Chief Executive Officer Lisa Su, AMD has revamped its products and told investors that its processors are now competitive with Intel's in computing and with Nvidia's in graphics.

On Monday, Nvidia cut its sales forecast for the current quarter, citing the effect of China's weaker economy on chips for gaming and data centers, while Intel last week cited slowing spending on server chips for its lower-than-anticipated forecast.

AMD's fourth-quarter net income was $38 million, or 4 cents a share, compared with a loss of $19 million, or a 2-cent loss, a year earlier. Revenue in the period rose 6 percent to $1.42 billion, compared with analysts' average projection of $1.44 billion.

The computing and graphics business posted sales of $986 million in the fourth quarter, up 9 percent from a year earlier, driven mainly by AMD's Ryzen computer processors and data-center chips. The company is trying to make a comeback in server processors against Intel, an opponent that has about 99 percent of the market. At its peak, more than a decade ago, AMD owned about a quarter of that lucrative business.

First-quarter revenue will be about $1.25 billion, plus or minus $50 million, AMD said. That compares with analysts' average estimate of $1.47 billion. Adjusted gross margin, a measure of profitability, will be about 41 percent for the period, slightly wider than the average projection of 40.2 percent.

Shares jumped to as high as $21.34 in extended trading after the results were released. The stock had closed at $19.25 in regular New York trading, bringing its two-day decline to more than 12 percent. AMD's shares surged 80 percent last year.

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