In 1962 the Avis car-rental company made advertising history.
At the time, Avis (CAR) was the second-largest vehicle rental company in the U.S. behind Hertz.
Related: Analyst tweaks AMD stock price target ahead of Q2 earnings
Rather than gloss over their runner-up status, Avis pulled a U-turn and came up with a slogan that proudly celebrated its place in the lineup:
“We’re number two,” the tagline stated. “We try harder.”
The ad campaign took off and within a year Avis went from losing $3.2 million to earning $1.2 million, according to Slate, the first time it had been profitable in more than a decade.
The market-share gap between the two companies began to shrink, and the worried Hertz executives projected that by 1968 Avis might need a new ad campaign — because it would no longer be No. 2.
Advanced Micro Devices (AMD) knows a thing or two about being No, 2, seeing as how it is the second largest vendor of data-center graphics processing units after AI chip kingpin Nvidia (NVDA) .
AMD CEO Lisa Su speaks during Vox Media’s 2023 Code Conference at the Ritz-Carlton, Laguna Niguel on Sept. 26, 2023 in Dana Point, Calif. (Photo by Jerod Harris/Getty Images for Vox Media)
AMD CEO sees ‘great progress across the board’
AMD has been struggling to capture market share from its rival with its new MI300X offering. On July 30 AMD reported second-quarter earnings, and the chipmaker beat Wall Street’s expectations.
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Chief Executive Lisa Su said revenue came in above the midpoint of guidance and profitability increased by a double-digit percentage due to higher-than-expected sales of the company’s Instinct, Ryzen and EPYC processors.
Data-center-segment revenue more than doubled (up 115%) year-over-year to a record $2.8 billion, driven by the steep ramp of Instinct MI300 GPU shipments and a double-digit percentage increase in EPYC central-processing-unit sales.
“As we look into the second half of the year, I think we would expect that MI300 revenue would continue to ramp in the third quarter and the fourth quarter,” Su told analysts during the company’s earnings call.
AMD posted earnings 69 cents a share, up from 58 cents a year earlier and ahead of Wall Street’s forecast for 68 cents a share. Revenue totaled $5.84 billion, an increase from the year-ago tally of $5.36 billion and beating analysts’ consensus estimate of $5.72 billion.
Looking ahead, AMD said it expected about $6.7 billion of revenue in the current quarter, versus Wall Street expectations of 93 cents in earnings per share on $6.61 billion of revenue.
“When we started the year, I think the key point for us was to get our products into our customers’ data centers, to have them qualify their workloads, to really ramp in production, and then see what the production capabilities are, especially performance and all of those things,” Su said.
“And I can say now, being sort of more than halfway through the year, we’ve seen great progress across the board,” she added.
TheStreet Pro analyst: AMD balance sheet ‘a work of art’
TheStreet Pro’s Stephen Guilfoyle noted in his recent column that “there are parts of AMD that are struggling, but the company is hitting home runs precisely where it needs to.”
“I think the data center numbers show that even with Nvidia in the driver’s seat as far as supplying AI-driven demand for high-end GPUs, there will be more than enough secondary and tertiary demand for the likes of AMD to do very well for themselves,” he said.
“Oh, and the balance sheet is a work of art. NVDA should rally alongside AMD on this release,” Guilfoyle added.
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Analysts reacted to AMD’s earnings report by adjusting their stock price targets.
Bank of America Securities lowered the firm’s price target on AMD to $180 from $195 and affirmed a buy rating on the shares after the company delivered “a good quarter with modestly better outlook.”
The firm said AMD’s MI300 AI product sales forecast was raised to $4.5 billion-plus from $4 billion-plus for calendar 2024.
But operating expense is increasingly intense while gross margin is expanding only modestly, B of A said. It attributed its lower price target to a recent reduction in sector multiples.
Truist lowered the firm’s price target on AMD to $156 from $162 and affirmed a hold rating on the shares, according to The Fly.
The second-quarter results topped estimates but third-quarter guidance was “mixed,” the investment firm said.
AMD’s data-center and client end-market upsides will likely dominate sentiment, Truist said.
The firm added, however, that its longer-term concerns remain, with the company’s position in artificial intelligence likely “confined” relative to Nvidia’s solutions and its X86 server market slowly coming under pressure from new CPU competitors.
Morgan Stanley analyst Joseph Moore raised the firm’s price target on AMD to $178 from $176 and maintained an equal-weight rating on the shares.
Given the setup with computing strong but embedded weaker, Moore said, he didn’t expect an upward revision and calls the company’s better-than-expected third-quarter guidance “a surprise.”
The AI commentary was “quite optimistic” and the 2024 target was revised up to $4.5 billion from $4 billion, Moore said.
The “good quarter, particularly in the context of the sharp selloff, should be a relief,” the analyst added.
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