The drivers behind AMD’s Q2 blowout
There have been many investor related and technical articles that outline AMD’s (NASDAQ:AMD) new products, but there’s some question as to what drove AMD to exceed expectations in Q2 and what is behind the forecast for Q3 and Q4 2017. While the main driver behind the quarter is known only to AMD, at least one analyst speculated that the beat was due to the Ethereum mining rush, where Ryzen played a distant second fiddle. What’s the truth though?
AMD was recently reiterated a value of $9 by Barclays, which may have influenced the company’s stock down 9% from $13.40 to $12.15. In the research note, Barclays argued that AMD may see a large negative effect due to the end of the Ethereum mining boom created from the growing digital currency market based on blockchain technology.
The research note came to the conclusion that AMD’s recent Q2 growth in its computing and graphics segment was driven by GPU sales and not by CPU (Ryzen) sales.
We are revisiting AMD’s last earnings release with an analysis of the [Ethereum] tailwind, which now appears to be the source of the better revenue in June/Sept [guidance], and why investors should place very little value on this earnings stream.
This may have led them to the conclusion that AMD must have overestimated their newly projected revenue for the third and fourth quarters should the likely scenario that the Ethereum mining rush comes to an end.
We believe estimates could be too high next year should this [Ethereum] tailwind dry up.
To come to those conclusions, Barclays may have made these assumptions:
1. That Ethereum mining will follow the trend that occurred with Bitcoin, ALTCoin, and Litecoin mining, where the price of video cards was pushed up beyond the reach of gamers and where these cards were then dumped on the second-hand market when mining became unprofitable.