6.21.2007

AMD "Short-Term' Upgrade - Buy Today, Sell Tomorrow

From the Associated Press:

"Stifel Nicolaus analyst Cody Acree upgraded the stock to a short-term "Buy" from "Neutral," and set a $17 price target on it... "We believe the first-quarter's underperformance was not representative of AMD's true end demand and that second-quarter revenue will likely recover a portion of first-quarter's shortfall," Acree wrote in a client note."

Sounds like I was right about the Q4 channel flooding. AMD tried to make Q4 look good and as a result compounded its Q1 numbers with a double serving of poor demand and inflated inventories. AMD's Q2 results may represent slightly normalized numbers and show things aren't as bad as first thought but don't get too carried away. The numbers are still terrible.

AMD needs to post at least $1.6B revenue this quarter to break even. At the moment they're only expecting at least ~$1.2B. The trend doesn't look to be in AMD's favour as Intel is just getting ready for another round of price cuts. AMD is about to mass produce a bigger die product while Intel will start transitioning to smaller ones at 45nm next quarter. The cost/unit gap between the 2 companies will only get bigger allowing Intel to mass produce quad-core profitably.

Intel has successfully denied AMD's the ability to generate enough revenue to support 2 Fabs and it is only about to get worse. Don't be surprised if AMD cancels its Fab38 upgrade.

2 comments:

SPARKS said...

Could be, however, there is more to this than meets the eye. Perhaps someone, somewhere knows about an equity buyout or a fab sellout. In either case, AMD's numbers don't support a $1.08 uptick. Sounds like the crowds are running right to the edge of the cliff.

SPARKS

Anonymous said...

Well if you have the stomach and know what you are doing you can make some money.

AMD's short float is over 13%, with a >50% increase in the shares that are short on AMD over the last month alone. So things can easily be manipulated to either break the shorts or make sure the shorts don't get broken - I would stay well away from AMD in either position as you can see a huge swing in either direction (or used covered options to minimize potential damage).

At this point it seems like the stock price will be driven more on short term market play attempts as opposed to fundamental health (or sickness) of the company.

The INQ also reported Q4 channel stuffing (remember Ruiz's 30% at all cost to break the monopoly) - it does explain the precipitous drop in Q1 (coincidentally after AMD secured financing) - this means some rebound likely in Q2, but more red ink.

As for Barcelona it won't matter from either production or revenue perspective in 2007 even if AMD hits schedule without delay. Mobile growth (or lack thereof) will likely determine if AMD returns to profitability in either Q3 or Q4. Pbviously 2008 will be driven by K10 sucess/failure vs Penryn.

AMD's fat server margin days are over with exception of the small market 4P+ areas and desktop pricing on K8 ain't gonna be pretty in H2'08. If Intel will soon be pricing dual core 6750's at ~$185 (and 6650's at ~$165) what is that going to do to the top end Athlon 6000? Remember what the top end FX price used to be in the good old days? It's going to put AMD SKU's in such a tight range you have to start wondering whether it is worth it to have that many separate SKU's - it's like McDonald's having 7 different sizes of fries...