Analyst Note| Abhinav Davuluri, CFA |
AMD reported second-quarter results that exceeded management’s guidance, while 2020 revenue growth was guided higher to 32% (one quarter after it was lowered to 25% from 29% due to COVID-19). The firm expects to continue gaining market share at Intel’s expense in the second half of the year. Based on the full year guidance, AMD’s second half sales are implied to be up 39% over the first half, which we attribute to the ramp of new game console chips for the latest PlayStation and Xbox as well as continued momentum in server chip sales. After increasing some of our share gain and gross margin assumptions for no-moat AMD, we are raising our fair value estimate to $31 per share from $25 per share. Shares were up over 10% during after-hours trading, and about 25% since Intel announced its 7-nanometer process would be delayed. Despite Intel’s ongoing manufacturing woes, we continue to believe market expectations for AMD’s share gains are too high.