AMD Earnings: New Chips Can Help AMD Avoid Greater Chip Down

Advanced Micro Devices Inc. will have a chance to show how the new smaller architecture piece impacted the business this week, hot on the heels of a positive earnings report from rival Intel Corp.

AMD

AMD, + 3.12%

is scheduled to report revenue from the third quarter after trading closed Tuesday. AMD's report follows Intel

INTC, + 8.1[ads1]0%

shares accumulated after the major chip maker gave an optimistic forecast, unlike chip manufacturers Texas Instruments Inc.

TXN, + 1.77%

and Xilinx Inc.

XLNX, + 1.91% ,

who were not as hopeful.

Read: Intel suggests chip recovery is here, even when rivals are still waiting

Cowen analyst Matthew Ramsay, who has a better performance and a $ 40 price target, said there has been a lot "Noise" since AMD's latest earnings report with the company's August 7 release of its "Rome" tag, which was retrieved by Alphabet Inc.'s

GOOG, + 0.33%

GOOGL, + 0.41%

Google Cloud Platform.

“Combined with announced partners Amazon

AMZN, -1.09% ,

Microsoft

MSFT, + 0.56% ,

Baidu

BIDU, + 0.17%

and Tencent

700, -0.75% ,

We believe this has the potential for AMD to quickly capture x86 server shares against Intel's roadmap that may need Sapphire Rapids in 2021 to get back on track, Ramsay says. "Sapphire Rapids" is the code name for Intel's new refinement of the 10-nanometer process or the new 7-nanometer process.

In chip parlance, nanometers or nm refer to the size of transistors that run on a computer chip, and the general rule is that smaller transistors are faster and more efficient in using power. Rome uses a 7-nm process, while Intel has struggled to bring its 10-nm process chip to market.

"We believe 7nm Rome has the technical advantages of providing a superior TCO in many server workloads," Ramsay said. "Along with socket compatibility with Naples, a consistent roadmap and deep customer agreements, we believe this has renewed AMD as a viable second source for Intel in a market hungry for competition."

What to Expect

Revenue: Of the 32 analysts surveyed by FactSet, AMD is projected to average adjusted earnings of 18 cents per share, down from the 22 cents a share initially expected of the quarter. Estimize, a software platform that uses crowdsourcing from hedge fund managers, brokers, buy-side analysts and others, requires revenue of 19 cents per share.

Revenue: Wall Street expects $ 1.81 billion in revenue from AMD, according to 31 analysts polled by FactSet. This is down from the $ 1.94 billion forecast at the beginning of the quarter, but up from $ 1.65 billion reported in the previous year. Estimate expects revenue of $ 1.83 billion.

Equity Movement: AMD shares have declined 3.4% since the company's last earnings report, falling from a large fall following the outlook. By comparison, the S&P 500 index

SPX, + 0.41%

has received 0.3%, the technically heavy Nasdaq Composite Index

COMP, + 0.70%

has declined 0.4% and the PHLX Semiconductor Index

SOX, + 2.05%

got 3.5% at that time.

What analysts say

Wells Fargo analyst Aaron Rakers, who has a better performance and a $ 40 price target, said he is bullish on the stock ahead of earnings, especially to the company's thoughts on Intel's price decline in chip.

Given Intel's "competing response" to AMD's Rome release, the Rakers asked "Why wouldn't AMD have to respond to Intel 50% + list price reductions? "

" While AMD's EPYC Roma distributions on hyper-scale / network customers are a key focus, we continue to believe that the company's expanded list of supercomputers / HPC wins should be considered a very positive competition validation, "Rakers said.

Of the 38 analysts covering AMD, 14 have purchases or overweight, 21 have hold rating and three have sales or underweight, with an average price target of $ 33.01, almost 1% above Friday's close.