July 29, 2019

AMD – Market expectations are for Uniform ROA to expand to record-highs, but management has concerns about product adoption, margins, and rising costs


  • Advanced Micro Devices, Inc. (AMD:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 27.5x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about product adoption, margins, and rising costs
  • Specifically, management may be concerned about the sustainability of the recent adoption of their Vega product. Furthermore, they may be concerned about expected margins of their next generation of products, and they appear concerned about continued declines in Semi-Custom revenues and increases in operating expenses. Finally, they may be concerned about the impact of higher inventory levels on free cash flow and their ability to reach gross margin targets for the second half of the year.
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