AMD Guide Too Low?

AMD's (NASDAQ:AMD) guide for Q1 and 2019 looks too conservative. We've correctly believed for a long time that AMD's guidance was not conservative but looking at the underlying trends this time, there looks like upside.

Let's take a look.

Here's the company's one and two year revenue growth trends. This is where we usually find clues in underlying trends. The two-year trend adds this year's growth to last year's same quarter growth. That way you smooth out one-timers to catch an underlying trend.


2018 2018 2019

Q3 Q4 Q1


A E
Total Revenues 1653 1419 1250
YOY 4.36% 5.90% -24.10%
2yr 25.27% 27.71% 15.71%

The 2-year revenue trend in both Q3 and Q4 was around 26%. Their guide assumes a huge drop-off in Q1 to a 16% two-year trend. Yes crypto peaked as a percent of revenues for AMD in Q1 last year but that should make for a lower one-year growth rate in Q1. If you think about the math crypto shouldn't hurt your Q1 2-year growth rate. So it looks conservative.

Let's Look At 2019

We're at about $1.3B for Q1 revenues versus their guide of $1.25B. To get there we have about $785mm for Computer and Graphics ("C&G") and $532mm for their other revenue line EESC (Enterprise, Embedded, and Semi-Custom).

Normal seasonality for EESC is up for the first 3 quarters and down for the fourth quarter.

For C&G we take the 2-year run rate in Q1 and accelerate it slightly through the year.

Remember there's launches across AMD's business units so it's fair to think there's acceleration potential through-out the business. Plus as crypto becomes a lower piece of last year's business and channel inventory normalizes, two huge headwinds subside as we go through the year.

That can allow growth to shine through.

The company guided to high-single digit growth for the business but if you do the math based on what we said above your numbers can be nicely higher than the company.

I'm a little chicken to put out our numbers publicly just yet as we're still reviewing them but we have issued them to subscribers.

Conclusion

Whatever the normal trajectory should be off of a low first quarter or first half, I think it's fair to say there's nice upside this year. Our numbers are little nuts so I'm not ready to go out publicly with them just yet.

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. We have no holdings in the stocks mentioned unless otherwise noted.

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