Shares of Advanced Micro Devices (AMD) are down 11 cents, or 1.4%, at $7.86 after the company last night reported Q1 results that topped analysts’ estimates and forecast this quarter’s revenue to beat as well.
The slip in the stock in an otherwise up market is somewhat surprising given that price targets and estimates appear to be rising all around today. Even bears have mostly good things to say about theresults and outlook, especially prospects for the company’s new PC chip, “Trinity“:
Glen Yeung, Citigroup:�Reiterates a Buy rating and raises his price target to $12 from $9, writing that the company is “hitting all of our points” for the bull case, and that “clean 1Q12/2Q12 beat and raise builds upon the company�s campaign toward consistent execution and should assuage some investors� reservations about the stock.” Gross margin, moreover, is going in the right direction, and he is hopeful there will be no slip-ups anymore at manufacturing partner GlobalFoundries: “A main element of our positive bias toward AMD has been the potential for gross margin upside noting that their recently signed wafer supply agreement aligns gross margin with yield. AMD�s above consensus 1Q12 GM validates our view, and their outlook for continued GM progression throughout 2012 adds further encouragement. We acknowledge risk of yield issues at 28nm in 2H12, although our conversations with Global Foundries suggest learning from 32nm may mitigate some of that risk.” Yeung cut his 2012 estimate to $6.75 billion from a prior $6.86 billion estimate, but raised his EPS estimate to 80 cents from 78 cents on expectation of a higher gross margin.
Hans Mosesmann, Raymond James: Reiterates and Outperform rating and raises his price target to $10 from $8. The company has put manufacturing issues behind it and is ready to dazzle, he seems to think. “The stronger than seasonal Advanced Micro Devices guide is no fluke. Finally, AMD has clarity in its business prospects now that GlobalFoundries has resolved
its manufacturing issues that severely limited Llano �APU� sales in 2011 and more importantly overshadowed a truly powerful computing solution. Going forward, we shall see how mainstream APUs go head to head with a more traditional x86 CPUs in the upcoming Ultrathin/Ultrabook battle.” Mosesmann raised his 2012 outlook to $6.85 billion and 72 cents a share, up from $6.77 billion and 70 cents.
Stacy Rasgon, Bernstein Research: Reiterates an Outperform rating and a $10 price target. “AMD’s guidance for Q212 was strong,” he writes, “up 3% at the midpoint off of a higher than expected Q1 base (above normal seasonality and above consensus). Gross margins were guided up as well (indicated “flat to up a bit”) with opex roughly in line with expectations.” Like Mosesmann, he’s loooking to Trinity to pay off: “Llano shipments appear to be very strong. However, Llano’s successor, Trinity, is now shipping to OEMs, in preparation for a launch later this quarter (we expect sometime in the May/June timeframe). Trinity improves on all Llano performance characteristics, incorporating “Piledriver” CPU cores and a refreshed GPU, with 2x the performance/Watt of Llano. – Additionally, Trinity comes in a thin BGA package, enabling use in “thin and light” notebook systems, at likely more aggressive price points than Intel-specd systems might be able to reach, given the lower CPU cost.” Rasgon trimmed his 2012 revenue estimate to $7.019 billion and lowered his EPS a penny to 90 cents, still well above consensus.
Craig Berger, FBR Capital: Reiterates an Outperform rating and raises his price target a buck to $11. Berger was a bit disappointed by the processor average selling pieces, which were flat with the prior-year period. “Stepping back, we like shares of AMD and think the stock trades very inexpensively on various metrics, and with still-negative investor sentiment. We see possible upside from share gains in client and server, and from mix and margin benefits as Llano/Trinity make up a greater portion of shipments.” Berger raised his estimate for 20212 to $6.74 billion from a prior $6.698 billion, and raised his EPS estimate to 73 cents from 65 cents.
Michael McConnell, Pacific Crest: Reiterates a Sector Perform rating, writing that “fair value” for the stock is still just $9, or 10 times his 2013 EPS estimate of 90 cents. McConnell doesn’t have anything particularly negative to say, and he notes the momentum that Trinity seems to have: “AMD stated that unanticipated customer order pull-ins for 32 nm Trinity APUs enhanced
product mix in Q1, particularly from PC OEM customers in emerging markets. AMD believes these pull-ins to be indicative of the strong design-win traction of Trinity APUs in upcoming customer models. AMD has stated that Trinity has captured over 90 design wins at PC OEMs this year versus 70 design wins for its predecessor, Llano, in 2011.” McConnell raised his 2012 estimate to $6.83 billion and EPS of 75 cents, from a prior $6.74 billion and 68 cents.
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