AMD Doing In Intel (AMD, INTC)

Includes: AMD, INTC
by: Faisal Laljee

Advanced Micro Devices, Inc., better known as AMD has been kicking its chief rival Intel's you-know-what. Until last year, Intel had always had one up on AMD. It had cornered both the personal computer and the server market. After years of beating AMD by cutting deals with PC makers, mass production and monopolistic pricing, despite AMD's superior technology and faster, outperforming chips, it is finally now AMD's turn.

By forming key partnerships with smaller computer makers, and some larger ones like HP and Lenovo, AMD has taken a slice of market share from Intel that has hit home with the industry. Suddenly, AMD is the star and is being given celebrity status and now Intel must turn things around, revamp their operations, re-brand their chips and catch up to AMD.

The server market is where AMD (NYSE:AMD) has eaten into Intel's market share the most the past year. Based on shipments, AMD's share rose to 22.1% in the first quarter, up from 16.4% at the end of 2005, according to Mercury Research. Additionally, AMD has domestic and international anti-trust lawsuits pending against Intel. After hitting lows close to $15 last year, the stock had almost tripled earlier this year before dropping more than 25% in the last two months. The stock currently trades at 16 times earnings and is very close to its 200 dma.

I think this stock could hit $40 in the next 3-6 months, a move of about 30% and I recommend buying this stock between $30 and $31.

Update: What a timely post. Just a few hours after I posted my buy recommendation on AMD, S&P upgraded it to 5 stars. They did it partly due to the announcement regarding the new power-saving processors earlier today and re-iterated their $50 price target. While I expect the stock to hit $40 in the next 3-6 months, I don't disagree with their target. I hope you bought it when it touched its 200 dma at 29.50 this morning.