Drivers for stock rally: Advanced Micro Devices, Inc. (NASDAQ: AMD) stock surged over 16% on 30th January, 2019 (As of 10:59 am GMT-5; Source: Google finance) after the company reported the net income of $38 million compared to a net loss of $19 million a year ago and net income of $102 million in the prior quarter. The sales at AMD’s computing and graphics segment, which includes graphic chip sales to data centers, rose over 8.5 percent to $986 million, beating the analyst average estimate of $939 million, according to FactSet. Sales of Ryzen desktop and notebook processors and datacenter GPUs offset lower GPU sales as the channel continued working through elevated levels of graphics inventory.
Cash, cash equivalents and marketable securities were $1.16 billion at the end of the quarter as compared to $1.06 billion at the end of the prior quarter. Free cash flow was $79 million for the fourth quarter 2018.
AMD in the fourth quarter of FY 18 has reported the adjusted earnings per share of 8 cents, which is in line with the analysts’ estimates for the adjusted earnings per share of 8 cents. The company had reported the adjusted revenue growth of 6 percent to $1.42 billion in the fourth quarter of FY 18.
For the full year 2019, AMD expects high single-digit percentage revenue growth driven by Ryzen, EPYC and Radeon datacenter GPU product sales as the company ramps 7nm products throughout the year. The analysts were targeting growth of about 6 percent.
AMD’s fourth-quarter gross margin rose to 38 percent from 34 percent a year earlier. The company expects adjusted gross margins to be more than 41 percent for 2019, which is its highest level in nearly eight years.
The company expects to launch over 30 percent more Ryzen systems in the year compared with 2018 and expects the CPU side of its business to grow faster than GPU. The investors are clearly banking on the company’s next generation of chips for PCs and data centers/servers, especially its higher-margin Epyc chips for servers, coming out in the second half of 2019.
Downside: Revenues is down 14 percent sequentially due to lower revenue in the Enterprise, Embedded and Semi-Custom segment. The company has issued first-quarter sales guidance of $1.25 billion, short of consensus estimates of $1.45 billion.