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AMD Gets Mixed Review From Deutsche Bank Before Earnings

“We expect a solid quarter out of AMD, with product-cycle driven rises in semi-custom," Deutsche Bank says. But it's concerned about margins.
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Deutsche Bank analyst Ross Seymore on Friday offered mixed commentary about Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report, ahead of the semiconductor giant's earnings report due Tuesday.

“We expect a solid quarter out of AMD, with product-cycle driven rises in semicustom, continued but slowing quarter-on-quarter and year-on-year growth in server [central processing units] after a strong first half of 2020, seasonal growth in personal-computer CPUs, and a lull in PC [graphics processing units] ahead of a fourth-quarter product-driven rise,” he wrote.

“We are comfortable with AMD's positive revenue trajectory through 2020 and into 2021.”

But Seymore sees issues. “We are concerned that the pace of gross-margin  improvement may slow given continued semicustom ramps in second-half 2020 and in 2021 as a whole,” he said.

Still, “given Intel’s  (INTC) - Get Intel Corporation Report earnings report indicating strong personal computers, we see a solid demand environment that should also aid AMD.”

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AMD shares recently traded at $80.45, up 1.3%. They have jumped 62% year to date through Thursday.

As for Intel, on Thursday afternoon, it reported third-quarter revenue of $18.33 billion, down 4% from a year earlier, and non-GAAP earnings per share of $1.11. Revenue edged past an $18.24 billion FactSet consensus, while EPS was in line with consensus.

Intel has suffered myriad woes in recent years, including an inability to produce new chips in a timely manner. Five analysts cut their share-price targets after the earnings report.

The lowest estimate came from Rosenblatt Securities’ Hans Mosesmann, who cut his target to $40 from $45. 

Intel recently traded at $48.27, down 10%. The stock has fallen 11% year to date through Thursday.