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Wolfe Research is worried that AMD will not be able to deliver on Wall Street's sky-high expectations, setting the stage for a "difficult" setup for the stock heading into the January earnings.
WOLFE ON $AMD: 'SETUP FOR JANUARY EARNINGS LOOKS CHALLENGING'
"We think the setup for the stock into Jan earnings is difficult. While forecasts can change as CY25 proceeds, we don’t think there’s enough visibility to guide AI in line with $10bn street expectations, and guidance…
— Wall St Engine (@wallstengine) December 17, 2024
Wolfe Research begins its latest investment note by highlighting the lack of visibility on AMD's AI-related sales:
"While forecasts can change as CY25 proceeds, we don’t think there’s enough visibility to guide AI in line with $10bn street expectations, and guidance of $7bn will drive an expectation that they will raise that guidance later – which they may not be able to do."
In essence, Wolfe Research believes there is insufficient evidence to support Wall Street's current consensus estimate for AMD of $10 billion in AI-related sales through 2025. Conversely, should AMD guide to a lower sales target of ~$7 billion during its upcoming earnings in January 2025, it would also drive the street's expectations of a guidance raise later in the year, setting the stage for an eventual disappointment.
In a critical tidbit, Wolfe Research now expects AMD to entirely eschew the provision of any solid guidance on its AI-related sales:
"Our best guess is that AMD won’t be in a position to guide AI for CY25 – which will in itself drive concerns."
On a more granular level, the research firm expects "some downside" to Wall Street's consensus estimates for the upcoming first quarter of 2025, largely on the back of "slow 1Q PC seasonality off a strong 4Q24 (we model 1Q rev of $7.04bn vs. Street $7.09bn)."
Moreover, Wolfe Research also expects Xilinx - a subsidiary of AMD - to record a broad-based sales recovery only in H2 2025.
Accordingly, Wolfe Research has chosen not to publish a specific stock price target for AMD as it continues to crunch through the ongoing flux:
"Our rating and estimates remain under review as we assess the impact."
For the benefit of those who might not be aware, Bank of America (BofA) also recently flagged the rise of Arm-based vendors as a key concern for AMD, especially as the market share of Arm-based server CPUs reached 7 percent in Q3'24 "vs. <5% in 2023 and ~1% in 2022."
On the other hand, Rosenblatt still believes that AMD will be able to capture a "double-digit GPU compute share" in 2025 even without a significantly superior offering to NVIDIA's.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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