Advanced Micro Devices (NASDAQ:AMD) continues to enjoy high price multiples despite falling by 11% in the last week. Investors realized that the quarterly earnings lift from server chips did not offset the slowing sales in PC CPUs ahead. At ~$50, the stock is 31 times forward earnings. AMD has no room to post earnings a share growth of less than 45% Y/Y.
AMD’s revenue fell 16% Q/Q to $1.79 billion but is up 40% Y/Y. gross margin of 46% is healthy, lifted by Ryzen and EPYC processor sales. For Q1/2020, operating income of $177 million translated to diluted earnings of 14 cents a share. Cash stood at $1.4 billion.
AMD’s inclusion in Lenovo and HP systems will lead to steady sales ahead. Ryzen is ramping up a mobile 4000 processor that competes effectively against Intel’s (NASDAQ:INTC) mobile CPU. Conversely, revenue from the semi-custom segment fell 21% Y/Y to $348 million. Until the console refresh, AMD will need to rely on higher EPYC sales.
On the balance sheet, total debt fell to $488 million, down from $1.1 billion last year. Finally, AMD will have fewer interest expenses and more cash flow to invest in the business. At 0.5 times leverage, AMD has no financial risks ahead.
Looking ahead, AMD forecast revenue growing 25% for the full-year. This suggests investors will have to wait another year before the stock sustained an uptrend to the $60 range.