Question not whether AMD can take market share from Intel, but just how much

For more: Analysts’ reactions to Intel’s earnings and Texas Instruments Income

First and center in AMD’s results will likely be data center sales, after Intel reported a 20% drop in critical data center sales three months ago. while AMD more than doubled. Intel reported a scarier 9% drop on Thursday, and investors will be looking for clues as to whether Intel can control the competition a bit.

Wall Street, on average, expects AMD to report $1.44 billion in enterprise, embedded, and semi-custom sales — the segment containing data center chips and game consoles — nearly twice as much three times what the chipmaker reported a year ago. The only lack of clarity to those numbers is AMD’s insistence don’t break data center sales from game sales.

See more: Intel seems to be feeling the competitive heat from AMD

Currently, AMD is about half the size of Intel in terms of market valuation — $111.96 billion versus $215.02 billion — while Nvidia Corp.
NVDA,
-0.18%

reduce the combined market capitalization of the two at $486.4 billion.

Another Wall Street concern seems to be how many constraints from silicon wafer supplier Taiwan Semiconductor Manufacturing Co.
TSM,
+ 0.20%

will hinder AMD’s sales of semi-finished products.

“We expect AMD’s July report to be constrained by wafer availability,” said Raymond James analyst Chris Caso. “While there are likely to be some favorable trends, AMD’s obligation to support the console [original equipment manufacturers] as well as newly won commercial PC [stock-keeping units] limit the redirection ability to provide more to AMD’s servers”.

Caso said supply constraints and the possibility of increasing market share will help insulate AMD from concerns that PC sales are peaking and will soon slow down.

At the last check, the company went one step further to complete its acquisition of Xilinx Inc. worth $35 billion.
XLNX,
+ 1.02%,
like UK and Regulatory body of the EU signed the agreement at the end of June, after Approved by both shareholder companies in April. All that remains is for regulators in China to sign off on the deal. Additionally, during the quarter, AMD announced first major stock buyback plan in the company’s history of $4 billion, compared with partial acquisitions of $100 million over the years.

Read: Chip crisis continues, but one sector could be stocked up for relief

What to expect

Income: Of the 33 analysts surveyed by FactSet, AMD is expected to post adjusted earnings of 54 cents per share on average, up from 46 cents per share expected at the start of the quarter, and 18 cents/share reported for the same period last year. Estimize, a software platform that draws estimates from hedge fund executives, brokerage firms, buy-side analysts and others, called for earnings of 59 cents a share.

Turnover: AMD predicted second-quarter revenue of $3.5 billion to $3.7 billion in April, while analysts averaged a revenue forecast of $3.23 billion at the time. On average, 30 analysts expect revenue of $3.62 billion, up from the $1.93 billion reported in the first quarter of the previous year. Estimize is expected to reach $3.72 billion in revenue.

Ancient movement: While AMD earnings and sales have topped Wall Street estimates in the past four quarterly reports, the stock hasn’t risen the next day since a year ago. when the stock rallied nearly 13%.

AMD shares rose nearly 20% in the second quarter. In contrast, the PHLX . Semiconductor Index
NUMBER X,
+0.63%

up 7.1%, S&P 500
SPX,
+ 1.01%

up 8.2% and the tech-heavy Nasdaq Composite
COMP,
+ 1.04%

up 9.5%. Shares are down about 7% from a closing record high of $97.25, set on Jan.

What Analysts Are Saying

Like Raymond James’ Caso, Bernstein analyst Stacy Rasgon addressed wafer limitations.

“While AMD stock has faltered a bit due to concerns about potential limitations, worries about PC peaking, higher spending, and Intel’s more aggressive potential, the trajectory and growth The company’s presence continues to be strong,” wrote Rasgon, who has a market performance rating and $95 Price Target on AMD.

“While we wait to see if they can make more leading innovations from here, AMD is still required to continue raising capital as Intel enters the transition; We believe that showing they can sustain the change especially on server shares (currently showing an acceleration as Milan take on Intel’s delayed Ice Lake) will be an important sign. more important,” said analyst Bernstein.

Jefferies analyst Mark Lipacis also expects AMD to gain more market share in these areas.

“Our tests show that the 3rd generation server CPU, Milan, is ready to take the physical part from Intel in 2H21, and the 4th generation server CPU, Genoa, will be particularly different. distinguished by its high core count,” says Lipacis.

Cowen analyst Matthew Ramsay says that AMD has two good years to capitalize on not only Intel’s shift, but also to gain momentum as Nvidia works to bring its new CPUs to market.

“Even after raising our 2021 growth guidance to 50% from 37% on the Q121 earnings call, we see numbers rising from continued PC chip sales momentum and growth in both PC and PC shipments. business owners and supers helped in Q4/Q1 due to Intel’s latest Sapphire Rapids delay,” Ramsay said. “While Sapphire’s slight delay isn’t so much related to the drop in initial shipments from Q4 FY21 to Q1 Q1, we believe it could spur some increased shipments from AMD. to high-end customers, and we now forecast data center CPU revenue to grow Q4 in Q4 2021.”

Of the 38 AMD analysts, 22 have a buy or overweight rating, 14 have a hold rating, and two have a sell rating, with an average price target of $106.73.