AMD plunges on disappointing Profit Guidance

Advanced Micro Devices, Inc. (NASDAQ: AMD) shares fell more than 17 percent after the company expected lower second quarter gross margins, raising concerns on the company’s probability.

The chip maker said revenue rose 18 percent to $984 million in the first quarter, compared with $832 million a year earlier. The number is just in line with analysts’ estimate. Strong demand for Ryzen CPUs, which was launched in March, boosted the sales in ADM’s computing and graphics division.

Excluding certain, the company lost 4 cents per share in the quarter ended April 1.

“We achieved 18 percent year-over-year revenue growth driven by strong demand for our high performance Ryzen CPUs as well as graphics processors,” Dr. Lisa Su, AMD president and CEO, said in the earnings release.

However, the company now expects the second-quarter gross margins to be about 33 percent, down from 34 percent in the first quarter.

AMD shares fell as much as 18.5 percent to $11.09 in the early trading. The stock is one of the best performing stocks in the market, with 20 percent gain this year through Monday and 264 percent gain the in the past 12 months.

Goldman's chip analyst Toshiya Hari reiterated his sell rating on AMD after the earnings, saying that the valuation for company is high.

"AMD reported an in-line 1Q op loss of $0.04 per share and failed to exhibit the 2Q upside the bulls were anticipating," he wrote in a note to clients Tuesday, CNBC reported. "We believe the GM [gross profit margin] guide, in particular, was a disappointment as expectations, founded on the launch of Ryzen (desktop CPU) in March, were high into the print."

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