AMD is sinking ahead of earnings

Lisa Su, chief executive of AMDAMD

Shares of AMD (Advanced Micro Devices) sank more than 2% in trading Wednesday as the chipmaker geared up to report its second quarter earnings after the closing bell.

Analysts polled by Bloomberg expect the company to report adjusted earnings of $0.128 per share on revenues of $1.724 billion.

Investors will be closely watching AMD’s Ryzen processor sales results. The company launched a 12 nm version of the product line — one of the smallest sizes on the market — in April. That revenue may be able to offset any slump resulting from softening demand for its other chips in the fact of declining cryptocurrency prices, according to Credit Suisse.

“While crypto at roughly 15% of revenue continues to be a headwind to 2H estimates, incremental growth from Ryzen channel fill and share gains in GPU at AAPL and INTC should protect 2H estimates from downward revision,” John Pitzer, the bank’s head of technology research, said in a note to clients this week.

Interest in cryptocurrency mining has declined alongside the prices of major coins, with the flagship bitcoin down 39% since the beginning of the year. Bitmain, a Chinese company that makes computers specifically for mining, released an ASIC machine (short for application specific integrated chip) that could also eat into AMD’s revenue.

“While there are several moving pieces and still a large degree of uncertainty – the current level of GPU-mining demand is most likely unsustainable, and could present a material headwind to C2H18 as AMD sees a meaningful reduction to our estimated ~$460m of CY18 Crypto-related Revenue,” said Credit Suisse.

Credit Suisse has a $13.50 price target for shares of AMD — roughly 14% below where shares were trading Wednesday.

AMD is up 43% since the beginning of 2018.

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