Firstly let's discuss their target. EPS is expected to come in at approximate $0.15. This would represent over 33% YoY (incredible growth). Although Ryzen CPUs account for a large portion of this, it's the Epyc growth that has me more largely concerned. Essentially AMD priced in almost exponential growth for Epyc over several earnings reports, this one included. It's a notoriously difficult market to crack, and even more so to predict.
I posted this chart when the 3rd generation Ryzen was announced back in June, pointing to the huge short squeeze we saw from the 2nd gen release and the previous Athlon 64 release which is the last time AMD had an advantage over Intel.
Since then, both AMD and Intel have lowered prices for their CPUs to remain competitive, but AMD still has a clear lead.
So why haven't we seen more price movement? Well, not only is AMD struggling in GPUs, still trying to find a foothold in the market while shifting the old inventory left in the channel following the crypto mining collapse. AMD also faced some problems scaling up to meet the demand for the new Ryzen CPUs. Specifically, it was the high end, high core count CPUs that are still being eagerly awaited by many enthusiasts.
While AMD has been working hard to fix these problems, Intel has taken a leaf out of the AMD playbook with their chiplet design. Intel recently announced a new design which layers chips on top of each other, using more vertical space. It remains to be seen how well that design can be kept cool, but it is certainly an interesting development, still a year or so away from store shelves.
So, with all this in mind, if we assume Epyc hits it's target, AMD are likely to come in slightly below guidance. Perhaps they will have some good news lined up for their delays though? The other thing to consider is the semi-custom segment. The console cycle is again moving towards the next phase and this is where AMD makes a substantial amount of their money. Again, it's extremely difficult to put numbers on this, and it could substantially influence sentiment on the stock.
But let's discuss the thing you care about; my prediction.
I think we'll sit at a similar level to where we are now, probably up 1 rung, trading between 31-35 dollars, building some strong support ahead of a potential large move up to the previous all-time high at 42 dollars set back in 2006.
As always with AMD, the call with Lisa is by far the most important part of earnings for me. Investors will be looking to be reassured about the GPU situation, about the production of the high-end Ryzens and the progress winning big deals for semi-custom and Epyc. It's all about keeping up the momentum.
AMD's earnings are due on the 23rd of October, currently I have no plans to modify my holdings (approximately 10% of the portfolio)
I'll write another update once I've digested the next earnings release.