Goldman Sachs Reiterates Sell on AMD (AMD)

October 18, 2013 11:34 AM EDT
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Goldman Sachs maintained a Sell rating on AMD (NYSE: AMD) with a price target of $2.25. Analyst James Covello pointed toward weak margins and limited earnings power.

"We expect AMD will continue to see margin pressure as it moves from a royalty to a chip supplier model in gaming. (2) Our analysis suggests AMD has lost 3% share to Intel since 1Q12 (Exhibit 4), and we expect share loss to continue. (3) We believe there is risk of an inventory write-down as a result of AMD's $1.15 bn "take-or-pay" agreement with GlobalFoundries. Inventory is up 64% since 4Q12 yet revenue is up just 27%. (4) AMD's increased share count will likely limit future EPS. Even if investors pay 15X forward EPS, in order to justify the after-market price of $3.80, 2014 net income would need to be about $195 mn vs. the Street at $104 mn," said Covello

For an analyst ratings summary and ratings history on AMD click here. For more ratings news on AMD click here.

Shares of AMD closed at $4.09 yesterday.

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