AMD Ryzen Pro Unexpected Launch Indicates Surprises Ahead
- AMD released Ryzen PRO ahead of schedule in a tame launch.
- Nevertheless, HP's adoption, as well as adoption by other top tier vendors, will meaningfully push up 2017 prospects.
- We see 2017 consensus as too low and expect that analysts will start moving the numbers up soon.
On June 29th, Advanced Micro Devices (NASDAQ:AMD) unexpectedly launched its Ryzen PRO desktop product line to little fanfare. Ryzen PRO comes with a unique set of security and support attributes (see image below) and is targeted toward enterprise audience.
AMD management, at Financial Analyst Day in May, indicated that Ryzen PRO would be rolled out in Q3. The image below indicates that Ryzen 3 would launch in early Q3 followed by Ryzen PRO later in Q3. However, with late June launch, Ryzen PRO has been moved up ahead of Ryzen 3.
In other words, the launch was a positive surprise, and should have been seen as good news by investors.
However, AMD press release of the launch had very little in the form concrete OEM support or availability – something we see at impactful launches such as the recent EPYC launch.
Underwhelmingly, the press release claimed, “Broad Adoption of Ryzen PRO Powered Desktop PCs Expected from Global OEMs and Others” without mentioning any names. When it came to availability, the press release claimed: “The world's largest suppliers of commercial client desktops are expected to provide Ryzen PRO-based PCs to businesses worldwide in the second half of 2017. “
The bottom line was that the press release was weak and investors may have wondered why the Company did so. Consequently, it is no wonder that that stock continued with its recent downdraft in spite of the press release (image below from Google Finance).
Why did AMD even bother to pull in the launch schedule for such a tame launch?
We may have gotten a partial answer to that question on Friday, when it became known that HP (HPE) has adopted Ryzen PRO in a family of business PCs. This news, which was also picked up by Fortune after the markets closed, is very significant development for AMD.
AMD’s new products are typically introduced to business PC lines much later than the time they are introduced to consumer PC lines. However, with Ryzen PRO, it appears that AMD is getting a near simultaneous adoption by customers for both the consumer and business PCs.
We believe that the accelerated commercial acceptance, as well as the unexpected schedule, will have significant market share implications for AMD. While investors may have assumed little or no enterprise PC sales in H2 2017, that assumption has just changed.
Given this development, we believe that estimates of $4.8B for 2017 revenues is too low. We predict 2017 revenues in excess of $5.5B. Consensus EPS estimate of $0.07 is also very low. We expect EPS to be north of $0.20 for the year.
Very soon, Wall Street analysts will have to start factoring shipments to commercial customers. Investors can expect the consensus estimates to start creeping up soon creating an uplift for the stock.
Our View of AMD: Strong Buy
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This article was written by
Author of Beyond the Hype, a comprehensive emerging technology stock analysis and discussion service on Seeking Alpha Marketplace. Currently, we focus on identifying and investing in the semiconductor, renewable energy, storage, EV, autonomous vehicle, CPU, and GPU markets.
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