Despite reporting a solid quarterly result and raising its forecast, Advanced Micro Devices, Inc. (NASDAQ:AMD) barely moved higher after the report.

The company has plenty of work ahead, even after launching many great products in the CPU and graphics chip space. Of the company’s three growth areas — Graphics, Compute and Solutions — Graphics has some uncertainties due to the destabilizing of the cryptocurrency mining market.

AMD’s Market Opportunity

On its quarterly earnings slide deck, AMD outlined the market opportunity for personal computers, immersive (i.e. consoles) and data center were $28 billion, $15 billion and $21 billion, respectively. AMD launched 10 new products in those markets.

In the fourth quarter, the low ASP (average selling price) for PC chips may concern investors. Though the average price for desktops is on the low end due to the popularity of the budget Ryzen 3, mobile ASPs rose as AMD rolled out mobile CPU shipments. Since Ryzen on mobile is in its infancy, as more OEMs offer the chip, ASP should move higher this year.

Zen 2 Refresh

Though sales are still strong for Zen, AMD plans to launch Zen 2. This is a natural progression for the product as it gets refreshed. Not affected significantly by the Spectre and Meltdown exploit like Intel Corp. (NASDAQ:INTC), AMD will still make changes in the future Zen 2 core.

Zen 1 still gets a CPU microcode patch to mitigate any security gaps. Customers concerned about the security flaw may opt to upgrade their old Intel-powered CPUs with the secured Zen 2 chip instead, provided AMD CPUs offer a superior price/performance over Intel,

EPYC-Powered Servers

In the fourth quarter, AMD reported revenue in the Enterprise, Embedded and Semi-Custom segment increased by 3%. Shipments of EPYC processors ramped up in the period. Though EPYC is new to the market, customers are qualifying and deploying this solution.

AMD won dozens of server deals during the quarter, which is a good sign that it will book even more deals this quarter and beyond. Key EPYC customers include Microsoft Corporation (NASDAQ:MSFT) and its Azure platform. Hewlett-Packard Enterprise (NYSE:HPE) started shipping the ProLiant DL385 server powered by EPYC. Baidu, Inc. (NASDAQ:BIDU) selected AMD’s EPYC for its big data, cloud computing and AI solutions.

Growth in Radeon Unit Even Without Crypto

AMD highlighted the 60% year-over-year growth in the Computing and Graphics segment. Strong Radeon graphics and Ryzen desktop chip sales gave the segment a lift. The company is so confident in the strength of the Ryzen GPU and EPYC product ramp for Q1/2018, it forecast revenue increasing 32% to $1.55 billion.

The impact of demand stemming from cryptocurrency mining is a mixed bag, but mostly negligible to AMD’s bottom line. CEO Lisa Su previously estimated crypto mining contributed to a mid-single-digit percent of total revenue. With the Vega product line launch, AMD is still primarily targeting the enthusiast market.

Markets incorrectly assumed that the Vega GPU and Polaris shortage is due to the mining when actually memory (GDDR5 and HBM) is in short supply. This led to retailers charging GPUs at prices well above the manufacturer’s suggested retail price. So while crypto mining will keep prices of GPUs and other components high, AMD will adjust its chip supply upward so that it meets end-user demand.

AMD Valuation

Of the six finbox.io models created, the average fair value of AMD stock is around $13.50. If AMD’s revenue and profits grow in the low double-digits, then the implied value is almost 15% higher.

Source: finbox.io (click link to enter your assumptions)

As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.