Nucor earnings beat by $0.08, revenue fell short of estimates
On Tuesday, Bernstein analysts maintained a Market Perform rating on AMD (NASDAQ:AMD) shares but reduced the price target to $95 from $125. The stock, which has declined over 44% in the past six months according to InvestingPro data, currently trades at a P/E ratio of 83.9x. The adjustment comes as a response to several factors impacting AMD’s financial outlook, including changes in the PC market, new licensing requirements for AI accelerators in China, and the acquisition of Xilinx (NASDAQ:XLNX) Technology (ZT), which is expected to add approximately $150 million in annualized operating expenses.
The analyst, Stacy Rasgon, noted that the AI sector’s potential for AMD is becoming increasingly uncertain, especially with the new sanctions in China. Each $1 billion in revenue is estimated to contribute roughly 25 cents to earnings, and the new restrictions are expected to significantly affect the company’s earnings. Despite these challenges, InvestingPro analysis shows AMD maintains strong fundamentals with a current ratio of 2.62x, indicating solid liquidity position. AMD’s core PC business is also facing challenges due to channel effects, with client shipments last quarter exceeding the peak of the COVID bubble.
The report also pointed out that while AMD’s market share performance in core markets is strong, the company could face increased competition from Intel (NASDAQ:INTC), which may become more aggressive in response to its own challenges. Other segments such as embedded systems and gaming are at risk of being impacted by macroeconomic headwinds and tariffs, respectively.
With these considerations, Bernstein projects AMD’s earnings to be close to $3 for the year and still under $4 even excluding the charge. The firm’s stance remains cautious, with the lowered price target reflecting the potential decrease in AMD’s revenue and earnings. InvestingPro data reveals analysts expect 23% revenue growth in FY2025, with 16 additional exclusive insights available for subscribers through the comprehensive Pro Research Report.
In other recent news, Advanced Micro Devices (AMD) is facing a potential revenue impact ranging from $1.5 to $1.8 billion, as highlighted by analysts from JPM. This financial challenge includes an $800 million inventory charge, which is expected to affect about 10% of AMD’s total datacenter revenue. Wells Fargo (NYSE:WFC) has maintained its Overweight rating on AMD with a price target of $140, despite new U.S. export controls that could result in an additional $800 million charge related to inventory and purchase commitments. AMD is currently seeking licenses for affected exports, although approval remains uncertain.
Furthermore, AMD has announced plans to begin chip production at Taiwan Semiconductor Manufacturing Company’s new facility in Arizona, marking its first U.S.-based manufacturing endeavor. This strategic move aligns with AMD’s expansion efforts, which include the recent acquisition of ZT Systems, a supplier of AI servers. In collaboration with Stable Diffusion, AMD has also optimized models for its Radeon GPUs and Ryzen AI APUs, enhancing performance without compromising quality. These developments reflect AMD’s ongoing efforts to navigate regulatory challenges and expand its market presence.
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