|AMD: FBR Cuts Target; $5 Possible Downside |
By Tiernan Ray
Shares of Advanced Micro Devices (AMD) are up 28 cents, or 5%, at $6.29, despite a cautious report from FBR Capital‘s Craig Berger this morning, in which he reiterated an Outperform rating but cut his price target from $11 to $9, writing that the stock could see “more downside towards $5 this summer” before the shares are fully “washed out.”
The stock has been weighed down by a few different investor concerns, writes Berger, including weakness in Europe for PC sales, “a flight to quality” mentality that has driven investors out of AMD’s high-beta stock, and some breakdown in sales by PC original design manufacturers (ODM), who are holding off on building computers as they wait for expanded supply of Intel’s (INTC) “Ivy Bridge” microprocessors.
Still, Berger sees upside from the recent introduction of AMD’s own new processor, “Trinity“:
Regarding Trinity, early product reviews are generally positive but not ebullient, likely helping AMD close the performance gap at the low end of the value PC market and penetrate into some Ultrabook-type machines, perhaps with a small pricing boost. Trinity offers a CPU performance upgrade over Llano, better thermal specs, and enhanced graphics performance—but is not a game changer for AMD, in our view. Stepping back, we think AMD is improving its execution and product portfolio, though this transition will still take much time. We see potential upside from share gains in client (Llano/Trinity) and server (Interlagos), with mix and margin benefits possible, too.