The fourth-quarter earnings report from Advanced Micro Devices (NASDAQ:AMD) re-affirmed the turnaround story unfolding. The company met analyst estimates as revenue grew by an impressive 52% Y/Y to $3.2 billion.
Intel’s (NASDAQ:INTC) misstep in refreshing its chips to a smaller nanometer manufacturing level is giving AMD an advantage. This helped AMD post revenue from computing and graphics of $1.96 billion, up 18% Y/Y. AMD posted lower average selling prices for client processors, due to a higher mix of mobile processors. The Radeon graphics unit rose. If Nvidia (NASDAQ:NVDA) did not suffer from supply constraints for its GPUs, Radeon sales may not have risen as much.
AMD expects revenue will top $3.2 billion in Q1. For the year, it forecast revenue growing by 37%. The pandemic sped forward the need for remote working. This in turn lifted sales of PCs, laptops, and server upgrades for corporations. That trend will continue this year as workers stay at home.
Expect sold-out Ryzen and Radeon chips limiting revenue growth. AMD posted decent margins in the low 40s but the shortage should have lifted profitability.
Your Takeaway
AMD is not a cheap stock. Its P/E is over 100 times, compared to Intel’s which is in the low 11s. Markets are wrong to assume that Intel will keep losing market share. AMD will need to stay ahead of Intel, boost marketing, and improve its supply chain.
