AMD stock slides on weak guidance: buy the dip?

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Advanced Micro Devices Inc (NASDAQ: AMD) is trading down in extended hours even though it reported market-beating results for its first financial quarter.

Why is AMD stock down in after-hours?

The semiconductor stock is being punished for the guidance that came in shy of Street estimates.

AMD sees its revenue to fall between $5.0 billion and $5.6 billion in the current quarter. In comparison, analysts were at $5.5 billion. On CNBC’s “Closing Bell: Overtime”, Wedbush Securities analyst Matt Bryson said:

On the call, I want to hear that the data-centre is going to bounce back and recover through the remainder of the year.

Year-to-date, AMD stock is still up roughly 30%.

Notable figures in AMD Q1 earnings report

Lost $139 million that translates to 9 cents per share

Had $786 million in net income instead a year ago

Adjusted per-share earnings printed at 60 cents

Revenue declined 5.0% year-on-year to $5.35 billion

Consensus was 56 cents a share on $5.31 billion revenue

Gross margin tanked 300 basis points to 50% in Q1

Data-centre and embedded sales made up more than half of the company’s total revenue in the recent quarter. Bryson added:

Gross margin at 50% was pretty much where expectations were. As data-centre number hopefully recovers for the remainder of the year, that’ll lift gross margin side of the equation moving forward.

Should you buy AMD shares?

Other prominent figures in the earnings press release include $1.3 billion of data-centre sales (roughly unchanged). PC sales brought in $739 million in Q1 (cut in less than half) while gaming sales declined 5.0% year-on-year to $1.8 billion.

Embedded sales jumped 160% to $595 million. Data-centre and PC sales were meaningfully below Street estimates in Q1.

Nonetheless, the Wedbush analyst stuck with his “buy” rating on AMD stock. His $95 price target suggests close to a 15% upside from here.

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