Advanced Micro (AMD) Shares Pummeled After Revised Guidance

Shares of Advanced Micro Devices Inc. (AMD) were trading down -0.31 or -12.55 percent to $2.16 per share in Tuesday's premarket after the company announced late yesterday it had downwardly revised its guidance for the second quarter. The announcement was made during trading hours prompting a close in the stock. When shares reopened, they opened 9 percent lower continuing to sell off in afterhours trading. Advanced Micro stock closed at $2.47, down -0.06 or -2.37 percent in Monday's regular trading session.

Sunnyvale, California based Advanced Micro Devices was founded by Jerry Sanders in 1969.
The company is a global semiconductor manufacturer, which develops and markets computer processors and derivative technologies. The company's products include chipsets, motherboards, graphic and embedded processors for servers, computers and other systems. Advanced Micro is the second largest manufacturer of x86 microprocessors and the only significant competitor of Intel (INTC) in the CPU market for x86 based PCs.

Advanced Micro's previous guidance for revenue for its second quarter ended on June 27th was originally down three percent plus or minus three percent and was downwardly revised to approximately a sequential eight percent or about $950 million. The company said in its press release that the sequential decrease was in large part the result of "a higher mix of Enterprise, Embedded and Semi-Custom segment sales and lower than anticipated Computing and Graphics segment APU unit volumes due to weaker than expected OEM PC product demand.

The company's forecast for second quarter channel inventory reductions and channel sales remained in line with expectations. AMD now expects non-GAAP gross margins to be about 28 percent versus its previous guidance of approximately 32 percent.

In addition, GAAP gross margins are expected to be additionally impacted by a one-time $33 million charge in relation to a technology node transition from 20 nanometer to FinFET, with 20 nm designs transition to the new FinFET node. The company's cash position will remain unchanged at the end of the second quarter with approximately $830 million, which was as anticipated.

The charge the company is taking is for modifying nodes to FinFET will significantly improve the performance and competitiveness of the products. This is especially true if the nodes are expected to clock high or if they are exposed to leakage.

AMD is expected to report its second quarter earnings on Thursday after the market close. The company will hold a conference call for the investment community at 2:30 PM Pacific Time (PST) or 5:30 PM EST.

AMD stock has been hit extremely hard with the stock is down approximately 43 percent so far this year. This morning's action will have the stock open below its 52 week low of 2.14 made last January. First quarter net income for the company had decreased a whopping -800 percent from the same period one year ago and the debt to equity ratio of the company has ballooned to 133.41.

Investors are expressing their disappointment selling the stock down this morning. Thursday's second quarter results could see the market take the stock even lower if the company reports significantly lower than expected numbers.

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Published on Jul 7, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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