According to the news report by MarketWatch, Advanced Micro Devices Inc. (AMD) needs its GPU (graphics processing unit) or graphics card sales to be substantial to be able to swing a surprise for its fourth quarter earnings. However, analysts are expecting the company crypto-related inventory problems to continue as it readies itself for its new products line-up.
AMD, whose stocks are finally up by 5.18% for the year so far, in releasing its fourth quarter earnings report after the bell on Tuesday, January 29. In the company’s previous quarter’s earnings report, AMD’s Chief Executive Officer Lisa Su stated that she expected graphics units’ sales to be meaningful for the fourth quarter, however, it would take at least a couple of quarters for the company to get back to normal.
AMD’s shares had nosedived after the company released its third quarter earnings report in 2018. The chip maker’s revenue and outlook were well below market expectations. This was because the company’s GPU sales plunged thanks to a massive slump in the cryptocurrency sector.
GPUs or graphics cards are used by cryptocurrency miners to carry out the complex computing that needs to be done to mine for cryptocurrencies. During the last half of 2017 and the early part of 2018, GPU prices shot up thanks to the massive demand from cryptocurrency miners.
At its peak in February of 2018, AMD’s popular GPU the Radeon RX580 cost an average of $550. Today, after massive price drops of 67%, the same GPU sells for $180.
However, crypto winter set in. The entire cryptocurrency market began a massive decline, because of which crypto mining also began to lose its sheen. Chip makers that had enjoyed a huge jump in sales of their GPUs suddenly had a huge build-up of inventory. Prices of the graphics units plunged and sales to the crypto-mining segment all but dried up.
Companies like AMD and Nvidia thus saw their share prices plunge in the third quarter of last year thanks to the slump in the crypto market.
For the fourth quarter, AMD has forecast an estimated revenue generation of between $1.4 billion and $1.5 billion. The market analyst consensus for revenues in Q4 prior to the release of the Q3 report, was at $1.6 billion.
AMD’s stocks have largely recovered from its massive plunge in October last year. The company has done this by focusing on building for the future. Recently, at the CES conference that was held in Las Vegas, Su threw the gauntlet at long-time rival Intel Inc. as well as Nvidia Corp., challenging them for the number one spot in PCs, gaming and servers.
While Intel has dominated the chip market for decades, AMD is expected to have a technological lead over its rival for the first in almost 10 years with its new 7-nanometer chip-manufacturing technology.
Market expectation for AMD’s fourth quarter earnings are at 8 cents per share, which is the same as the previous year’s Q4 target. This estimate is, however, down by 2 cents from what the market analysts had expected at the beginning of Quarter 4.
Revenues are expected to be at $1.44 billion, which is down from the previous year of $1.48 billion.
Overall, while the company has managed to make an almost complete recovery since October when its shares dropped massively, AMD is still 4% lower than its peak prior to the Q3 earnings release. After the Q3 earnings report, the company’s shares had dropped by 30% by December 2018.
AMD’s shares have gained 37% year-to-date, to close Friday’s trading at $21.93 per share.