Advanced Micro Devices, Inc. (AMD): Best Semiconductor Pick for 2019

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Advanced Micro Devices, Inc. (NASDAQ: AMD) shares are trading in the green after the company posted a bullish 2019 outlook. For the full-year 2019, AMD expects high single-digit percentage revenue growth, mostly driven by Ryzen, Epyc and Radeon data-center GPU products. The company also plans to increase its production for 7nm products throughout the year.

Investors are extremely hopeful about AMD’s Epyc chips for data centers and servers. These chips are slated to be launched in the second half of 2019.

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However, Advanced Micro Devices, Inc. (NASDAQ: AMD) warned the investors of seasonal downfalls in the first half of 2019. AMD management said that the expected weakness in the first quarter of 2019 is expected due to softness in the graphics channel, absence of blockchain-related GPU revenue and lower memory sales. Analyst Timothy Arcuri from UBS said in a note that AMD is executing its product launches “extremely well” but the stock will suffer some losses throughout the second half of 2019.

For the fourth quarter of 2018, Advanced Micro Devices, Inc. (NASDAQ: AMD) reported a net income of $38 million, or 4 cents a share, compared to a loss of $19 million, or 2 cents a share, in the year-ago period. Revenue in the period rose by $1.42 billion from $1.34 billion in the year-ago quarter. While the reported numbers were slightly below the Wall Street’s estimates, analysts liked the company’s stronger forecasts and margins. In the fourth quarter, AMD reported margins of 41%, compared to 34% reported in the year-ago period. The company also said 2019 margins will be even higher.

Gus Richard of Northland Securities, who has a “Buy” rating for AMD, said in a note that AMD’s results were better than feared. The analyst said that graphics inventory problem of AMD will be solved by the second half of 2019. He also said that the demand for AMD CPUs and GPUs will grow amid a stronger gaming industry.

Earlier in February, Stifel analyst Kevin Cassidy said in a report that Advanced Micro Devices, Inc. (NASDAQ: AMD) stock should be bought after it fell after Abu Dhabi’s Mubadala Investment sold over 34 million AMD shares. Cassidy said that AMD has a strong pipeline of differentiated products. He said that the stock should be bought on its weakness.

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Author does not have investment in stock discussed in this article.

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