Mosesemann picked up coverage today of both Intel (NASDAQ:INTC) and AMD. For Intel, he set a Buy rating and a $27 price target; for AMD he set a Sell rating and a $13 price target.
The two calls are obviously related; and just as obviously, his AMD view is the one that some people are not going to like. “AMD appears to have rested too long on its laurels in 2006 and is now in our opinion quite vulnerable in 2007 in terms of [microprocessor and graphics processor] market share as well as ASP declines.” Mosesmann contends that the Athlon64/Opteron architecture “is now aging,” while Intel’s Core2 Duo products “have unambiguous performance/price/power advantages in 95% of all PC applications vs. Athlo64/Opteron.” He says that AMD’s “late transition” to 65 nm in 2007 “does not resolve AMD’s dilemma.”
Mosesmann also says that AMD’s plans to add 33%-plus capacity adds risk to the story, as does the addition of the multiple business lines from ATI.
Not least, Mosesmann says that AMD’s prediction that it can grow at twice the expcected 10% growth of the microprocessor market in 2007 “is incredibly bold…it strikes us that there is no upside to this statement, just downside.” He also says that the company’s belief that it can maintain market share in graphics processors is “perhaps an even more aggressive statement by AMD given ATI’s recent woes.”
As for Intel, Mosesman says its new products, process technology acceleration and reorganization “has set the stage for the company to regain pre-eminence in the x86 market…we suspect AMD underestimates the giant that has been dormant in recent years.” And he adds that the purchase of ATI by AMD “will price ill-fated and a net positive for Intel in the medium term.”
Mosesmann says he expects Intel to gain modest overall market share in 2007, driven by the mainstream and high-end PC segments and servers. “At current levels INTC shares are the ’safest’ they have been in years, in our opinion. With the Vista launch and strong product lineup, we believe gross margins are set to increase starting in early 2007.
AMD shares today closed 15 cents lower to $21.97.
AMD 1-yr chart: