GPU revenues will grow from gaming and market share gain. This will be balanced by the revenue loss from Crypto.
a) AMD GPU Prices are still above MSRP.
"Nvidia’s top-end cards are at or close to MSRP in the best case scenario, though their lower-end cards are a bit inflated. AMD’s line-up is still at least 15% above MSRP, though like with Nvidia’s mid-range and entry-level cards, I can’t see the price of these cards coming down too much more due to the higher cost of GDDR5 and HBM2 compared to launch."Analyzing Graphics Card Pricing: July 2018
b) AMD is gaining market share for GPU from Nvidia according to Jon Peddie"So over the past 4 years or so, AMD's market share of the graphic card space has increased from around 18% to 35% today, and Nvidia's (NASDAQ:NVDA) market share fell from 82% to 65% today."https://www.jonpeddie.com/store/add-in-board-report
AMD VS Nvidia in driver stability, AMD 92% vs Nvidia 82% GPU driver scoreAMD VS Nvidia in stability, AMD 92% vs Nvidia 82% GPU driver score
c) Gamers demand will increase for GPU now that prices are closer to MSRP"According to Arya, investors are putting too much emphasis on GPU (graphics processing unit) sales from crypto miners. AMD’s first-quarter revenue included ~$200 million from crypto-related sales. Even if this demand falls, AMD’s GPU demand is strong among its core customers: gamers and developers."Market Realist
d) Lower Graphic card prices has helped in surge in gaming PCs, as per IDC
e) TSMC Expects 'Strong' Crypto Mining Demand to ContinueTSMC Expects 'Strong' Crypto Mining Demand to Continue - CoinDesk
f) Total Revenue in Q1 2018 from Crypto is not more than 10% of $1647(Q1 Revenue)= $164m. Out of this $64m revenue loss will be more than made up by Gamers and also increase in market share. So Loss from Crypto is approximately $100m
- CPU revenue including EPYC revenue will increase significantly.
a) EPYC revenues from Microsoft will be approx. $40m. Dropbox revenue will be around $10m. EPYC revenues from OEM will be approximately $50m . Add another $10m from rest of customers. This gives EPYC revenue as $110m
"Microsoft earnings number came out on 07/19/2018 in which their capital expenditure on datacenter amounted to $4.1B last quarter, which is up from $3.3B a year ago."
"The company said it generated $30.1 billion in revenue, up 17% year-over-year, and adjusted earnings of $1.13 per share. Analysts were looking for earnings of $1.08 per share on revenue of $29.23 billion. ... The company's fastest-growing segment was what it calls the "intelligent cloud," which includes server products and its Azure cloud computing platform. The segment's revenue was $9.6 billion, up 23 percent from a year ago."Microsoft Beats Quarterly Earnings Estimates -- Live Blog RecapMicrosoft Beats Quarterly Earnings Estimates -- Live Blog Recap
b) PC revenues (Laptops, Desktops, APU) will increase because of market share gain from Intel. Also the overall PC market share increased 2.7%
"Traditional PC Market Grows 2.7% in the Second Quarter of 2018, Strongest Rate Since Q1 2012, According to IDC" They also mentioned part of that growth was because of gaming PCsTraditional PC Market Grows 2.7% in the Second Quarter of 2018, Strongest Rate Since Q1 2012, According to IDC
c) Also Lisa Su in CNBC Interview, in April, already had One month of Q2 2018 data to be confident about Q2 2018 revenue growth. AMD CEO Lisa Su: Our Long-Term Strategy Is Paying Off | CNBC
d) "AMD Dominating the budget CPU scene with the AMD Ryzen 7 1800X"AMD Dominating the budget CPU scene with the AMD Ryzen 7 1800X
e) 12 AMD CPUs are in Top 20 bestseller list. Ryzen 5 2600X is in No 2 while Ryzen 5 1600,Ryzen 7 2700X ,Ryzen 7 2700 are No 4,5,6 respectively.https://www.amazon.com/Best-Sellers-Electronics-Computer-CPU-rocessors/zgbs/electronics/229189/ref=zg_bsnr_tab_t_bs#
Why AMD will raise Q3 guidance
a) Ryzen pro widespread availability and adoptions from Lenovo hp and dell
b) Cisco ramp up of EPYC
c) Threadripper 2 launch
d) Massive increase in Ryzen adoption by China
e) Joint Chinese EPYC royalties
f) 7nm Radeon instinct high end sales launch
g) Walmart and sams club moving all of it’s IT to Microsoft azure cloud
h) Robust sales of its gpu from intel laptop sales
i) Ramping of its new embedded EPYC socs
j) Surging market share of desktop cpus and Radeon gpus from gamers and hobbyists
k) Higher than expected Radeon gpu sales for Apple external gpu and nvidia boycott AND market share gain by AMD over Nvidia
l) Growing movement of business away from stumbling intel toward superior AMD
- Based on all the above details the model for Q2 2018 and for entire year 2018 is as follows:
a) Q1 2018 C&G Revenue was $1115m. Based on all of the above mentioned reasons C&G can easily grow 10% for Q2 2018(excluding Crypto Revenue)From this we get 1.10 * (1115-100) = $1116mb) Q1 2018 EESC Revenue was $532m. Adding additional EPYC revenue of $110m (from above) we get $642m
c) From (1) and (2) we get Q2 2018 revenue as $1758m.
d) Consider Gross Margin as 37% , Operating expenses as 28%, Share count as 1100m we get EPS as 14c.
e) Q3 2018 Guidance will be approximately $1898m
f) Considering H2 = 1.10 * H1 we get revenue for H2 as 1.10 * (3405) = $3745m
g) 2018 Revenue is then 3405 + 3745 = $7150m
h) Considering Gross Margin for the 4 quarters as 36%, 37%, 38%, 39% we have Avg GM=37.5%
i) Hence EPS for 2018 is 61c
j) Stock price after Q2 2018= ((3405 * 2) * (36.5-28)) / (1100 * 100) = 0.52 * 40 = $20
k) Stock price by end of 2018 is 0.61 * 40 = $24http://ir.amd.com/static-files/822a4d02-feae-4684-873a-78055a1854ce
Disclosure: I am/we are long AMD.