On October 29, Advanced Micro Devices (NASDAQ: AMD) held its Q3 2024 earnings call. Earnings per share (EPS) came in exactly on par with consensus estimates, at $0.92, for a pretty compelling 38% increase year-over-year (YoY).
Results in terms of revenue were not bad either at $6.82 billion, compared to analysts expectations of $6.71 billion — a 17% YoY increase.
Good news, then — right? Wrong — at the time of publication, AMD stock price has dropped from a previous-day peak of $166 down to $156.25, marking a steep 5.8% decline.
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To make matters worse, AMD shares have shed even more value in the premarket trading session — going as low as $153.57.
With this latest development, Advanced Micro Devices share price is up just 10.10% on a year-to-date (YTD) basis — lagging significantly behind the S&P 500’s gains of 22.98% in the same time period.
Markets react to AMD earnings — course correction or overreaction?
In the immediate aftermath of the earnings report, Wall Street analysts representing major investment firms primarily cited revenue guidance as the most notable sore spot. The chipmaker is projecting revenues of $7.5 billion — plus or minus $300 million, for Q4. Consensus estimates were slightly higher at $7.55 billion as a midpoint.
If you’re thinking that this is a little too anemic to cause a 5.8% price decrease, we’d tend to agree.
AMD did reveal some headwinds in the report— the company’s gaming segment revenue took a nosedive, declining by 29% from the previous quarter, and 69% YoY.
The embedded segment also saw weak signs of recovery — with revenues having increased by 8% from the preceding quarter, but still being down 25% YoY. That being said, these are not new developments and were expected.
However, on the whole, we would still call this an overreaction when taking into account the whole picture — data center revenue, at $3.5 billion, increased by 25% compared to Q3, and 122% YoY — while the client segment saw revenues increase by 26% in the three-month period. Perhaps most tellingly, operating income increased by 223% compared to this time last year.
Granted, analysts did expect more decisive outperformance — but the numbers suggest a solid growth trajectory nonetheless.
Is Advanced Micro Devices stock becoming an AI value play?
With the limited growth that Advanced Micro Devices stock has seen in 2024, this dip, if anything, represents a potentially solid buying opportunity.
The semiconductor contender’s latest product offerings have only been in the market for less than a month — and seeing as how available benchmarks point to performance that can compete fairly evenly with Nvidia (NASDAQ: NVDA), the payoff has yet to arrive in full, so to say.
At present, NVDA is trading at a less attractive forward price-to-earnings (P/E) ratio of 34, compared to AMD’s 30. Nvidia stock is up 190.44% YTD — and with a valuation equal to roughly 12% of U.S. GDP, anything less than continued outperformance will likely see NVDA shares retrace significantly in terms of price action.
Once all is said and done, will Advanced Micro Devices shares be able to provide blockbuster returns in line with its main competitor? Unlikely — but there is substantial growth potential ahead, and at the time of writing, readers can get exposure to it at a pretty reasonable price following this latest ‘discount’.
Featured Image:
Seemanta Dutta, sdx15, West Bengal, India — June 17, 2022. Digital Image. Shutterstock.
