AMD announced its earnings for first quarter of 2017, or “Ryzen Quarter” and immediately saw its shares plummet to what is one of the worst crashes in stock history. AMD generated revenue of $984 Million which is a healthy increase from the same quarter last year. Last year the loss per share was 8 cents and adjusted loss per share clocked in at 4 cents piece.
Our Take On AMD (NASDAQ: AMD 10.39 0.68%) – Earnings and Market Correction Analysis: Should You Buy?
At the time of writing AMD’s stock closed at $10.3 down 24.38% from $13.62 level just one day ago. In one day the stock has wiped out almost 1/4th of its market-value making it is the worst trading day in the almost decade of the company’s stock performance.
This support seems to have kicked in at the $10.3 level and appears to hold although a slight downward trend can still be seen in after-hours trading.
Immediate Support Level: $9.75
Secondary Support Level: $8.39
The volatility of the stock remains very high and I would urge extreme caution while dealing with the stock in the short term. There will continue to be some pricing weakness in the stock, and I expect it to hit immediate support levels if things take a turn for the worst. The thing to keep in mind is that AMD’s current price level is courtesy of a very heavy speculative premium.
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In other words, it was built on hype and while the company delivered solid financials, they weren’t the multi-fold increase the premium asked for: which resulted in the market correction you saw. Before we go any further, here is a quote from the company’s CEO on earnings day:
“We met our strategic objectives in 2016, successfully executing our product roadmaps, regaining share in key markets, strengthening our financial foundation, and delivering annual revenue growth,” said Dr. Lisa Su, AMD president and CEO. “As we enter 2017, we are well positioned and on-track to deliver our strongest set of high-performance computing and graphics products in more than a decade.”
AMD released its anxiously anticipated Ryzen architecture as well as revealed details about Naples at Vega GPU this quarter. Ryzen 7 and Ryzen 5 were both released and marked the first time of company had been competitive in the x86 segment in quite a few years. The company’s Compute and Graphics segment say a cool 29% increase in revenue.
Financial Summary
- Revenue of $984 million was up 18 percent year-over-year, driven by higher revenue in both the Computing and Graphics and Enterprise, Embedded, and Semi-Custom business segments. Revenue was down 11 percent sequentially, due primarily to seasonality in both segments. However, Computing and Graphics segment revenue decline was better than seasonal due to the initial sales from high-performance Ryzen™ desktop processors.
- On a GAAP basis, gross margin was 34 percent, up 2 percentage points year-over-year and sequentially due to a higher percentage of revenue from the Computing and Graphics segment, as well as a richer product mix within that segment. Operating loss of $29 million compared to operating losses of $68 million a year ago and $3 million in the prior quarter. Net loss of $73 million compared to net losses of $109 million a year ago and $51 million in the prior quarter. Loss per share of $0.08 compared to a loss per share of $0.14 a year ago and a loss per share of $0.06 in the prior quarter.
- On a non-GAAP(1) basis, gross margin was 34 percent, up 2 percentage points year-over-year and sequentially. Operating loss of $6 million compared to an operating loss of $55 million a year ago and operating income of $26 million in the prior quarter. Net loss of $38 million compared to net losses of $96 million a year ago and $8 million in the prior quarter. Loss per share of $0.04 compared to a loss per share of $0.12 a year ago and a loss per share of $0.01 in the prior quarter.
- Cash, cash equivalents, and marketable securities were $943 million at the end of the quarter, down $321 million from the end of the prior quarter primarily due to the timing of sales and cash collections, debt interest payments, and increased inventory.
AMD GAAP Financial Results Q1 2017
| Q1-17 | Q4-16 | Q1-16 | |
|---|---|---|---|
| Revenue | $984M | $1.11B | $832M |
| Operating loss | $(29)M | $(3)M | $(68)M |
| Net loss | $(73)M | $(51)M | $(109)M |
| Loss per share | $(0.08) | $(0.06) | $(0.14) |
AMD Non-GAAP Financial Results Q1 2017
| Q1-17 | Q4-16 | Q1-16 | |
|---|---|---|---|
| Revenue | $984M | $1.11B | $832M |
| Operating income (loss) | $(6)M | $26M | $(55)M |
| Net loss | $(38)M | $(8)M | $(96)M |
| Loss per share | $(0.04) | $(0.01) | $(0.12) |
For Q2 2017, based on a 13 week quarter, we expect:
- Revenue to increase 17% q/q, plus or minus 3%. The midpoint of guidance would result in a y/y increase of 12%.
- Non-GAAP gross margin to be approximately 33%,
- Non-GAAP operating expenses to be approximate $370 million,
- THATIC JV licensing gain of approximately $20 million
- Non-GAAP interest expense, taxes and other to be approximate $30 million, and
- Inventory to be down versus Q1 2017.
