AMD: ThinkEquity Flips To Buy From Sell

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Includes: AMD, INTC, SPSN
by: Eric Savitz
Eric Ross, semiconductor analyst at ThinkEquity, has flipped his opinion on Advanced Micro Devices (NASDAQ:AMD) to Buy from Sell, and raised his price target on the stock to $30, from $20. He says that sources in Asia and Europe indicate that fourth quarter demand “should be exceptionally strong.” Ross says he believes Street estimates for the fourth quarter are now too low.

AMD reports third quarter earnings on August 18, a week from today. Ross expects the company to provide “very strong” fourth quarter guidance, “much stronger than most investors expect.”

Ross says ASPs should be stable in the fourth quarter. He also thinks the company will continue to make substantial share gains against Intel (NASDAQ:INTC).

Ross expects the company to earn 23 cents a share in the third quarter, on revenue of $1.3 billon. For 2006, he is looking for $5.35 billion in revenue and profits of $1.25 a share; for next year, he sees $6.2 billion in revenue and profits of $2 a share. Ross notes that over the last 90 days, the consensus estimate for AMD for the third quarter has dropped to 23 cents from 31 cents; over the same span, the Street consensus has dropped to $1.11, from $1.31 for this year, and to $1.34 from $1.59 for next year. For the fourth quarter, the number has dropped to 33 cents a share, from 40 cents. “With such strength being reported in the supply chain,” he says, “we can only conclude that estimates are too low for [the fourth quarter].”

Meanwhile, AMD and Fujitsu yesterday filed with the SEC to sell 35 million shares of Spansion (SPSN) in an underwritten offering. That includes 21 million shares held by AMD, which would raise about $344 million at the current market price.

AMD shares today are up 81 cents at $23.95; Spansion is up 44 cents at $16.32.

AMD vs. INTC 1-yr chart:


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