FBR Research Upgrades AMD (AMD) to Outperform; Raises Estimates & PT
AMD Hot Sheet
Rating Summary:11 Buy, 7 Hold, 4 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23
FBR Research upgrades AMD (NYSE: AMD) to Outperform. Price target increased from $9 to $12.50.
FBR analyst says, "Yes, Intel's (Nasdaq: INTC) strong financial results bode well for AMD next week, but our upgrade more greatly emphasizes AMD's accelerating move to unconsolidate itself from GlobalFoundries. Indeed, GlobalFoundries' announcement that it and Chartered are now one firm accelerates the time when AMD will pay costs per wafer instead of fully burdened wafer costs, and gets AMD below the critical 50% customer threshold. Once AMD reduces its ownership stake in GlobalFoundries below 20%, then it will unconsolidate financial results, a positive. AMD's transformation into a fabless chip firm with variable costs appears to be happening quickly. Gross margins are the biggest swing factor for AMD shares, and management has said that a fabless CPU chip firm should garner 45%-50% gross margins. Assuming $6 billion in 2010 revenues and a 15x cash flow multiple, AMD shares would be valued at $8.25 at 40% gross margins, $14.50 at 45% gross margins, and $20 at 50% gross margins, seemingly compelling risk/reward. Furthermore, AMD appears to have good traction with its Congo notebook chips with HP, Lenovo, Acer, and others, and with its graphics chips, which our contacts say run meaningfully cooler than Nvidia's current offering. We are raising our 2010 EPS estimate from $0.10 to $0.35 and are introducing our 2011 EPS estimate of $0.75."
"We remain constructive on the chip sector and think fundamentals will remain robust for at least three more quarters. Favored long ideas include Marvell (Nasdaq: MRVL), AMD, Texas Instruments (NYSE: TXN) (large cap) and Silicon Labs (Nasdaq: SLAB), Fairchild (NYSE: FCS), Microsemi (Nasdaq: MSCC), and Int'l Rectifier (NYSE: IRF) (small cap)."
To see all the upgrades/downgrades on shares of AMD, visit our Analyst Ratings page.
FBR analyst says, "Yes, Intel's (Nasdaq: INTC) strong financial results bode well for AMD next week, but our upgrade more greatly emphasizes AMD's accelerating move to unconsolidate itself from GlobalFoundries. Indeed, GlobalFoundries' announcement that it and Chartered are now one firm accelerates the time when AMD will pay costs per wafer instead of fully burdened wafer costs, and gets AMD below the critical 50% customer threshold. Once AMD reduces its ownership stake in GlobalFoundries below 20%, then it will unconsolidate financial results, a positive. AMD's transformation into a fabless chip firm with variable costs appears to be happening quickly. Gross margins are the biggest swing factor for AMD shares, and management has said that a fabless CPU chip firm should garner 45%-50% gross margins. Assuming $6 billion in 2010 revenues and a 15x cash flow multiple, AMD shares would be valued at $8.25 at 40% gross margins, $14.50 at 45% gross margins, and $20 at 50% gross margins, seemingly compelling risk/reward. Furthermore, AMD appears to have good traction with its Congo notebook chips with HP, Lenovo, Acer, and others, and with its graphics chips, which our contacts say run meaningfully cooler than Nvidia's current offering. We are raising our 2010 EPS estimate from $0.10 to $0.35 and are introducing our 2011 EPS estimate of $0.75."
"We remain constructive on the chip sector and think fundamentals will remain robust for at least three more quarters. Favored long ideas include Marvell (Nasdaq: MRVL), AMD, Texas Instruments (NYSE: TXN) (large cap) and Silicon Labs (Nasdaq: SLAB), Fairchild (NYSE: FCS), Microsemi (Nasdaq: MSCC), and Int'l Rectifier (NYSE: IRF) (small cap)."
To see all the upgrades/downgrades on shares of AMD, visit our Analyst Ratings page.
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