AMD - EARNINGS UPDATE for NASDAQ:AMD by drchelsea1

0. Notes to follow;

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1. Current AMD stock price, 12:25EST $50.50;

2. Earnings after the close;

3. Rebound from about 3 days of Virus-oversold related selling / earnings positioning;

4. We are looking good going into earnings. I am not sure now is the time to discuss semi custom, data center or GPU sales, but I think AMD is really recession proof:

AMD Better Recession Choice Than Peers

5. We did have a hiccup on the 5600XT release, but we got setup by Jensen Wong. Nice play. Lisa Su played him, with the 5700XT release, and the price drop. Nvidia pulled the same thing here, and dropped the 2060 price to mess around and get a little payback; this was discussed in earlier notes and expected;

6. So we had the same problem with the 5700XT, but that was Nvidia with egg on their face for that one:

7. Do you hold into earnings?

Depends

So let's just break it down:

1. Day-traders

We would suggest you close your position into the close. Simple. Day traders usually close positions during the day, and close at the end. They can and do usually hold positions when the trend or chart is good, or whatever, when they decide there is more upside; but usually NOT earnings plays.

If you want to Day-trade AMD into earnings, then you should own like 100 shares or something, and see how it does, we don't think that short-dated options into the close is a good idea. You can of course, and Volatility Crush is about to wreck havoc on everybody at the close today:

So if you are day-trading whatever you spend on options, say the June 20 $55 CALL, be prepared to lose it all, as the extrinsic value will be gone tomorrow, depending on the direction we go. Which we think is up. So shares are better here, but I am sure you day-traders have all your own strategies. We don't day trade.

2. Swing Trader

If your horizon is days to months, buy and hold AMD, but only if you are sitting on profit. I don't think you should be buying into earnings and simply praying it will go up, and you sell and take a loss if it doesn't. If you have profit on your position, then feel free to add to it, and use some of the profit to purchase PUTS, I think the real issue is the $47.50 breakout / resistance / all time high / breakout point. I don't think purchasing PUTS above this makes any sense. They are overpriced, and I think you should be prepared to take a draw-down, as 6 months from now, everything semi will be 20 percent higher easy.

3. Investors

Easy, buy, hold, and buy the dips going forward. Long gamma market still, so that means "buy the dips" for the CNBC crowd;

4. Massive Positions

If you are like us, and own a massive position, we would suggest selling the March 20 $50 CALL, and buying the Feb 21 $45 Put. This is a nice collar, and you will make money, as it is calendar-based as well;

- drchelsea

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Also if you have a massive position and collar it, you will need some options beyond this, CALLS, or you could lose your stock if we skyrocket.

Cheers.

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And we think you have to look to Intel for earnings here. They went up nicely on a data center beat and guidance. I don't think INTC can really sell anything in the data center, unless to their own channel, and for next to free. They took a massive write down to the tune $3Billion to fight a price war with AMD, and they surrendered the desktop, so the data center is what they want to preserve. They did a good job, basically giving stuff away for free, and beating down their existing customers, with threats, and bundled pricing.

If you want to make new purchases for the data center, AMD offers twice the performance, and half the price of INTC here. Why would you buy INTC? Intel's numbers were basically slanted...

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The last argument about price/performance makes AMD unbeatable right now.

Especially with the virus?

Are you under Virus lockdown? Stay home and play video games on AMD client and server processors all day. This is what they are talking about on CNBC today. What do you do on virus lockdown for a few months? Online everything, including gambling of course.

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Note: Volitility Crush, you can pick options with dates past April, that will encompass another earnings report in early May as well, so those will hold their extrinsic value better (time vs what it is worth today if it was expiry).

Trade active:

3pm EST. We are online and ready :)

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Looks like the market is frozen. 3pm sideways action into the close? Or selling or buying into close?

Let's see...

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Watching Gold and Vix.

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Gold still getting a bid, and VIX holding bay at current levels.

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We also think that if AAPL disappoints, the VIX will explode. Long volatility at the close will also protect a large position as well, if things sell off tomorrow, it would be a real selloff. Not a fake virus selloff. That we are watching into the close, a long with just about everything.

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VIX and Gold tracking down into the close so far...

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AMD on a tear into the close. $50.65 and moving. Short covering...

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Thought: If INTC can destroy earnings, revenue and nicely raise guidance... I think AMD was waiting for this earnings report, and may have pulled forward semi - custom revenue. They got smoked on semi-custom on the last report, and we were saved by the Trade Truce.

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$50.75

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$50.80

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VIX on the move...

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North...

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What to watch for in AMD earnings, according to Seeking Alpha.

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AMD (AMD +2.3%) will report Q4 results after the bell. The Street expects $2.11B in revenue and $0.31 EPS.

Consensus revenue estimates: Computing and Graphics, $1.50B; Enterprise Embedded and Semi Custom, $603.8M.

For Computing and Graphics, AMD forecast sequential PC CPU sales growth but didn't specify the amount. The segment has been driven by strength in Ryzen desktop PCs.

Enterprise Embedded could show strength in server CPU sales. Last quarter, AMD guided strong double-digit percentage growth sequentially for server CPUs. Last week, Intel reported strength in its own server products.

Gross margin consensus is 44%.

The expected Q1 outlook: $1.86B in revenue and 44.1% gross margin.

The expected FY20 outlook has $8.62B in revenue.

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Back to equilibrium at $50.50

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MARKET CLOSED.

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SBUK Moving North

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AMD sees FY20 non-GAAP gross margin approximately 45%

AMD sees FY20 revenue growth 28%-30% year-over-year

AMD sees Q1 non-GAAP gross margin approximately 46%

AMD reports Q4 EPS 32c, consensus 31c

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Stock at $49

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-3.17%. Now we need to wait for the 5:30pm call to hear what Lisa has to say. They all calling guidance a small miss. I disagree. Let's see.

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AAPL = SMASHED IT. +8.00 AFTER HOURS.

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AMD TO $49.30

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AMD $49.45

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So we wait for the call now. Please remember we really did tank after the last earnings report, but hopefully, like last time, will will continue higher after this pause.

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Also, expectations are so high, it might take a day or two for people to realize the numbers were stellar.

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This may save us, as far as the analysts are concerned:

"AMD sees Q1 non-GAAP gross margin approximately 46%"

With the higher end CPU's and high end 2080 Ti Killer (Big Navi) coming, the analysts have been looking for better margins going forward, as AMD was seen as a "budget supplier". This will show we can play with NVDA, and INTC in terms of margins. This is the most important piece of information released so far.

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Lisa on the call now... Live.

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64 Core Threadripper, worlds highest performance desktop.

Mobile, expanded AMD laptops for OEM's

Ryzen 4000, just shipped in last quarter.

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Industries first ultra thin with 8 cores.

New processors and over 200 new laptops from retailers from OEM's in 2020

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RDNA GPU's expanded, 5500XT and 5600XT. Strong 3rd party reviews. 5600XT, best for under $300.

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First laptops powered by the new GPU's, new Apple MacBook Pro.

5000M launching in 2020. Mobile.

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Server Datacenter talking now...

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Data center grew by "strong double digit percentage". She promised 10+

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Server side OFFSET, semi custom weakness!

AMD moving to $48.85

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In server, unit shipments and ASP's driven by demand. 2nd gen are ramping much faster than LAST GENERATION.

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CLOUD PROVIDERS CONTINUES TO ACCELERATE.

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Shipments to Amazon, Google, Oracle, Dell, and Tencent. Amazon announced as well.

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In the enterprise, Dell is shipping now.

Stock at $49.05

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HPC we secured multiple large wins in the quarter, UK, France, and U.S. Deployments of super computers.

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She is implying that server-side wins will continue this year, and that growth for server wins against INTC will strong this year.

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20 designs in process or development right now.

Early in journey. AMD is the high performance computing and graphics leader.

CFO Now...

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Highest Annual, and high margin percentage.

"We are very pleased with our performance".

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"18 PERCENT REVENUE INCREASE QUARTER OVER QUARTER."

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EPS WAS 32C A SHARE, 8 CENTS A YEAR AGO. 400% GROWTH.

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EPYC PROCESSOR REVENUE, GREW BY STRONG DOUBLE DIGIT PERCENTAGE.

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Revenue up 4 percent year over year.

Excluding semi custom, 420 basis points higher. 420 percent.

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talking balance sheet now...

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Highest net cash position since 2006. Reduced debt by 1 Billion in 2019. Only 420M in debt left. Wow.

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Once again, the problem is semi custom, waiting for all new consoles...

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Guidance 28 to 30% for 2020

Margin 45%

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Question and Answer session...

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B of A Up. Asking about visibility into server gains against Intel?

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Visibility with the Cloud guys. Internal workloads are increasing. Enterprise side, HPE, Dell, Lenovo, ODM partners, significant increase in overall enterprise pipeline.

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Su Says - "For 2020 we want to grow our data share".

B of A - How should we interpret the Intel shortages?

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"We don't believe the shortages have anything to do with us gaining market share against Intel."

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Su - "We are gaining market share against Intel as our products are better, and cheaper. End of story. Their shortages are not relevant.".

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Goldman Sachs

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"What are the key assumptions behind the full year guidance?"

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Asking about margins now...