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Will the AMD share price surge on data centre revenue post-earnings?

The Advanced Micro Device’s [AMD] share price has had a solid July so far. Up 9.9% over the past month (as of 23 July’s close), the chipmaker is trading near its all-time highs, having accelerated just under 20% this year.

Helping the AMD share price is its growing data centre business, strong earnings and problems at rival Intel. With second-quarter earnings out this week, we look at what could move the AMD share price. 

 

What could move the AMD share price post-earnings?

AMD’s stock has benefited from a string of broker price target upgrades this summer.

In July Citigroup analyst Christopher Danely upgraded AMD from sell to neutral, moving his price target from $17 to $95 — a 3.1% upside on 23 July closing price. Danely cited AMD’s growing server business for the upgrade.

“Our checks indicate AMD share gains are finally accelerating in the server market, especially at hyper-scale companies such as AWS and Google,” Danely wrote in a note to investors.

“Our checks indicate AMD share gains are finally accelerating in the server market, especially at hyper-scale companies such as AWS and Google” - Citigroup analyst Christopher Danely

 

He suggests that AMD can continue its growth trajectory into 2022, in part due to manufacturing delays at rival Intel [INTC] that has allowed the chipmaker to steal market share.

“We all know who’s been eating Intel’s lunch and taking their market share for the last few years. It’s been AMD,” Mark Tepper, head of Strategic Wealth Partners, told CNBC’s Trading Nation ahead of AMD’s first-quarter earnings.

AMD’s data centre revenue more than doubled in the first quarter and is forecasting total revenue to grow around 50% for 2021. At Intel, data centre revenues have taken a drubbing, down 9% in the second-quarter results.

“When you look at AMD versus Intel, AMD has got better innovation, better performance, better price point and they’ve probably got like a two- to three-year competitive lead on Intel. The most important business for AMD is still data centre, but then you add in the Xilinx [XLNX] acquisition, that diversifies their portfolio. So that would be my play here,” Tepper said.

“When you look at AMD versus Intel, AMD has got better innovation, better performance, better price point and they’ve probably got like a two- to three-year competitive lead on Intel” - Mark Tepper, head of Strategic Wealth Partners

 

July also saw Goldman Sachs reiterate its buy rating on the stock, pinning a $111 price target on it, up from $106 — a 20.5% upside on 23 July close. Goldman sees non-GAAP earnings of $3.81 a share for AMD in 2022, rising to $5.48 a share in 2023 — well above consensus expectations. Goldman put AMD on its conviction buy list, believing the rest of Wall Street has underestimated the semiconductor manufacturer after several lacklustre earnings.

How closely AMD can hit analyst expectations will go some way to determining whether AMD’s stock soars post-earnings. Other areas to watch out for include any update on AMD’s acquisition of Xilinx. Having cleared regulator scrutiny in the UK and EU, the deal is now being looked at by regulators in China. Acquiring the company will help AMD ramp up its data centre business in the next few years.

 

When does AMD report Q2 earnings?

27 July.

 

What is Wall Street expecting?

Wall Street is expecting AMD to post earnings of $0.57 a share, up from the $0.18 a share seen in the same period last year. Revenue is pegged at $3.62bn, up 87.3% from last year’s $1.93bn. AMD is also guiding for revenue of around $3.6bn. For the full year, expectations are that AMD will see earnings of $2.17 a share, up $1.29 a share from the same quarter last year, on $14.74bn in revenue, a 51% jump.

$3.62billion

AMD's expected Q2 revenue

 

The AMD share price has an average $104.79 analyst price target on Yahoo Finance. Hitting this would see a 13.7% upside on 23 July closing price. Analysts seem split on the AMD share price. Of the 31 analysts offering recommendations, five rate it a strong buy and six a buy. The majority rate it a hold.

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