Stocks in Advanced Micro Devices Inc. (AMD) achieved all-time highs last Wednesday. The company attributes the rising prices to revenue boosts from cryptocurrency mining activities.
Crypto Mining to the Rescue for AMD
Since early February, shares in the company have risen by nearly 14 percent and are trading for over $11 USD each. AMD largely attributes its boost in revenue and stock trading to cryptocurrency mining, which has seemingly become profitable again given bitcoin’s sudden recent rise to roughly $9,300. Fundstrat’s Tom Lee recently commented that bitcoin mining, for the most part, would stay unprofitable if the currency’s price remained below $8,600. Now, bitcoin sits almost $700 above that price, and bitcoin miners are again witnessing income gains.
For the first quarter of 2018, AMD reported total revenue earnings of approximately $1.65 billion. That’s a 40 percent increase over the $1.18 billion the company generated during the first quarter of 2017. In turn, the company boasted an operating income of nearly $120 million, a net income of about $81 million, and diluted earnings per share of $0.08.
MKM Partners analyst Ruben Roy Roy predicted in January the start of the year would be positive for AMD. “The near-term numbers both for December and the guide for March are going to be quite good. I think the setup for crypto is quite good,” he told CNBC. President and CEO of AMD, Dr. Lisa Su explained that cryptocurrency mining now accounts for roughly ten percent of the company’s quarterly income. “We feel we have a very good idea of what people are using our products for,” she explained confidently. “It’s a nice growth factor.”
Remember When Crypto Wasn’t Doing So Good?
Concerns arose earlier this year when the prices of cryptocurrencies began to plunge at record rates. This resulted in lesser demand for graphics chips, which are ultimately used in crypto-mining ventures, but Su explained this never became a serious worry.
“We don’t see a significant risk of secondhand GPUs coming into the market… We do see a bit of volatility here and there, and that’s why we are putting into our forecast for the second quarter and the second half a little bit lower blockchain demand, but that’s more than made up for by the other new products and the way the new products are ramping in the business.”
You Can’t Please Everyone
Despite the positive changes, not everyone remains convinced that AMD is in solid health, and some Wall Street executives question whether the enterprise is headed in a sustainable direction. Several analysts suggest that two negative price target changes for AMD remain slated.
One of these analysts is Christopher Rolland, whose recent March report on AMD tells us he’s not sold on the company’s ability to compete with the big dogs.
“We view the quarter as incrementally constructive, but the risks surrounding an Ethereum-related GPU hangover in 2H18 remain under-addressed.”
Primary concern also remains that cryptocurrencies will continue to show signs of volatility throughout 2018, and potentially drop again – thus taking AMD’s stock with it. Nevertheless, rival Nvidia is confident that cryptocurrencies – and the mining activities associated with them – are here to stay.
Will AMD stay strong throughout the year? Post your comments below.
Images via AMD, Pak Wired