Shares in Advanced Micro Devices logged their biggest one-day drop in more than 10 years on Tuesday after the chipmaker posted downbeat first-quarter sales and received an analyst downgrade.
AMD was the biggest decliner on the S&P 500, falling 24.4 per cent to $10.30 after the company said net revenues rose 18 per cent from a year ago to $984m but was shy of analysts’ estimates of $984.5m.
Sales were driven by strong demand for its new Ryzen CPUs and graphics processors. But revenues were down 11 per cent sequentially, which the company attributed to seasonality in its computing and graphics segment and its enterprise unit.
AMD’s quarterly loss narrowed to $73m, or 8 cents a share, in the three months ended April 1, compared with a loss of $108m, or 14 cents a share, in the year-ago period.
That was wider than Wall Street forecasts of a loss of 7 cents. Adjusting for one-time items, a loss of 4 cents a share was in line with estimates.
Shares had surged 295 per cent last year as the company returned to annual revenue growth.
Bullish sentiment was partly fuelled by hopes that new chief executive Lisa Su could help drive a turnround at the company and in anticipation of the “eight-core” Zen processor that is part of its new Ryzen product line.
Moreover, analysts at Goldman Sachs noted that its outlook for revenues to rise about 17 per cent sequentially in the current quarter failed to show the “upside the bulls were anticipating”.
“AMD stock remains a ‘show me’ story as the market has, in our view, pre-traded the expected improvement in market share, gross margins and ultimately earnings per share,” said Toshiya Hari, an analyst at Goldman Sachs.
Adding to the bearish sentiment on the stock on Tuesday was a downgrade by analysts at Macquarie, who lowered the stock to “underperform” from “neutral” and cut their price target to $10 from $14, noting that Intel will have its own new products in the PC and server markets.
“Any share gains by AMD will likely be met with aggressive pricing actions by Intel, which could severely limit AMD’s margin expansion hopes,” said Srini Pajjuri, an analyst at Macquarie.
Elsewhere, shares in Coach gained 11.4 per cent to $43.15 after the handbag maker said lower inventory in mid-tier department stores translated into more full-priced sales at its own stores.
Same-store sales for North America — Coach’s biggest market — were up 3 per cent during the fiscal third quarter, which ended on April 1.
The rise marks the fourth straight quarter of like-for-like sales gains for the company and tops the 1.4 per cent increase the market was expecting. However, revenues fell 3.7 per cent to $995.2m, a larger than expected decline.
The gain underscored Coach’s efforts to lessen its dependence on department stores for its sales and regain more pricing control over its products.
The advance in Coach shares came as big US equity bourses were fluctuating between losses and gains.
By close of trading in New York, the S&P 500 rose 0.1 per cent to 2,391.17, the Dow Jones Industrial Average gained 0.2 per cent to 20,949.14 and the Nasdaq Composite added 0.1 per cent to 6,095.37.
