A month has gone by since the last earnings report for Advanced Micro Devices, Inc.AMD . Shares have added about 7.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Advanced Micro Posts Q1 Loss as Expected, Revenues Beat
Advanced Micro Devices reported loss of $0.07 per share in first-quarter 2017, which matched the Zacks Consensus Estimate and was narrower than loss of $0.14 per share reported in the year-ago quarter.
Revenues increased 18.3% year over year to $984 million and exceeded the Zacks Consensus Estimate of $983 million. The year-over-year growth was primarily driven by higher GPU sales.
AMD has two reportable segments - Computing and Graphics (focused on the traditional PC market), and Enterprise, Embedded and Semi-Custom (focusing on adjacent high-growth opportunities). The details of these segments are discussed below:
Computing and Graphics includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. This segment accounted for 60.3% of revenues and was up almost 29% year over year to $593 million. The year-over-year growth was driven primarily by higher desktop and graphics processor sales.
Client average selling price (ASP) increased year-over-year driven by desktop processor ASP. GPU ASP increased year-over-year primarily due to higher desktop GPU ASP.
The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. This segment brought in the remaining 39.7% of revenues, up 5.1% year over year to $391 million. The year-over-year increase can be attributed to higher semi-custom SoC sales.
During the quarter, AMD launched its first x86 Ryzen desktop processor, which is based on the new "Zen" core micro-architecture. The company introduced the Radeon RX 500 series line of GPUs based on a refined, second-generation "Polaris" architecture.
AMD is set to launch x86 server CPU, codenamed "Naples", in the second quarter. The company also announced collaboration with Microsoft to incorporate the cloud delivery features of "Naples" with Microsoft's "Project Olympus" server platform.
Moreover, Microsoft's new premium game console "Project Scorpio" will be powered by a highly-customized AMD SoC and is anticipated to be available for holiday 2017.
Further, AMD's "Vega" GPU architecture is on track to be launched in the second quarter. The company also announced the launch of the Radeon Pro Duo, the first "Polaris" architecture based dual-GPU graphics card.
Cash, cash equivalents & marketable securities were $943 million at the end of the first-quarter 2017, as compared with $1.26 billion at the end of the previous quarter.
Payables to related parties were $329 million in the quarter, which includes payables to GLOBALFOUNDRIES and ATMP JV. Total wafer purchases from GLOBALFOUNDRIES were $152 million in the reported quarter.
Long-term debt at the end of the quarter was $1.41 billion, down from $1.44 billion in the previous quarter primarily due to debt reduction activities.
Free cash outflow was $322 million, compared with free cash flow of $167 million in the previous quarter.
AMD expects second-quarter 2017 revenues to increase 17% sequentially (+/- 3%). At mid-point this reflects 12% growth on a year-over-year basis.
Gross margin is likely to be 33%, while non-GAAP operating expenses are estimated to be $370 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted up by 23% due to these changes.
Advanced Micro Devices, Inc. Price and Consensus
At this time, the stock has a nice Growth Score of 'B', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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