ajb
here is more details, pru is not the only one who downgraded amd today
Regards
-Albert
06:25am EDT 18-Jul-01 Prudential Securities (H.MOSESMANN 650-320-1631) AMD INTC
AMD: DOWNGRADING TO HOLD FROM BUY--LOWERING PRICE TARGET TO $22, FROM $28
AMD: Downgrading to Hold from Buy--LOWERING Price Target to $22, from $28
PRUDENTIAL SECURITIES July 18, 2001
Advanced Micro Devices (AMD - $20.00) -- NYSE
----- ANALYST(S) -------------------- -------- OPINION -------
Hans Mosesmann 650.320.1631 Current: Hold
Traci Tsuchiguchi 650.320.1639 Prior: Buy
Risk: High
Target: $22.00
Industry: Market Outperform
The senior analyst(s) does not have a material position in any of the stocks
mentioned in this report.*
----- EARNINGS ------------------------------------------------------------
FY Rev EPS P/E 1Q 2Q 3Q 4Q
Actual 12/00 $4,644.2A $2.36A 8.5X $0.57A $0.61A $0.64A $0.53A
Current 12/01 $3,924.0E $0.37E 54.1X $0.37A $0.05E ($0.05)E $0.00E
Current 12/02 $4,100.0E $0.60E 33.3X $0.02E $0.10E $0.18E $0.30E
----- FUNDAMENTAL --------------------------------------------------------
Avg. Volume: 7,800,000 Div/Yield: NA EPS Growth: NA
Market Cap: $6,320 m 52w Range: 46.10-13.60 P/E / Growth: NM
Shares: 315.99 m
----- BUSINESS -----------------------------------------------------------
Advanced Micro Devices (AMD), headquartered in Sunnyvale, CA, focuses on two
major digital semiconductor product segments: microprocessors (MPUs) and
non-volatile memories. Although AMD is a key player in several high-growth
product areas, the focus for investors over the years on AMD has been as a MPU
supplier (supplier of x86 Windows compatible MPUs).
----- HIGHLIGHTS ----------------------------------------------------------
* Downgrading AMD to Hold from Buy based on faster than expected P4 volume
ramp.
* Availability of P4s across all desktop segments by year end should pose
formidable challenge for K7 family.
* Lowering price target to $22 from $28.
----- DISCUSSION ----------------------------------------------------------
Downgrading AMD to Hold from Buy. We are downgrading AMD to Hold from Buy due
to faster than expected Intel P4 volume ramp. While AMD's woes are well known
given that the company has already released its Q2 results, we view that AMD's
superiority in terms of processor price performance will slowly but surely start
to erode going forward. We also view that Intel's aggressive posture in the
market regarding the P4 will not subside until Intel has positioned this product
family squarely in the mainstream of the market which should take one or two
more quarters. We continue to view that the current processor pricing trends
in the market should not necessarily be viewed as a price war, rather its a
"clock speed" war which results in near-term pricing pressure.
Tides Are Turning and Intel's Back in Control. Intel's (INTC--$29.13; Buy)
rapid P4 ramp has much to do with AMD's excellent positioning of the Athlon (K7)
family vs. the PIII as of last year. However, by the end of 2001 Intel will
likely have the full spectrum of the P4's available for all desktop segments
which essentially means that Intel's older PIII goes away in term of the desktop
as a product to compete head-on against Athlon. That would suggest a "speed"
or "clock" superiority for Intel/P4 by 1 or 2 speed grades which historically
spells trouble for AMD regardless of the merits of what true system performance
may be. In AMD's favor, we view that the Athlon/Palomino will likely continue
to dominate the mobile and value segments of the market particularly on the
consumer side.
The Implications of 300 mm wafer fabrication to Intel: Cost Superiority. The
counter-cyclical investment in '01 by Intel has huge implications in terms of
cost for Intel given that it will provide the company with around a 30% cost
reduction vs. the competition. Thus, all things being equal, a P4 processed on a
300 mm wafer would have as much as a 30% lower cost over one processed on an
older 8 inch (150 mm) wafer line. While we believe that the Athlon families and
future spin offs will likely have meaningful die size advantages vs. the P4,
the 300 mm card by Intel easily offsets this and then some. A positive for the
market is that we would expect that Intel would wisely use its future 300 mm
cost advantage not to entirely eliminate the competition (that does not make
sense), but to increase its margins. Thus, a return to more "normal" speed and
pricing dynamics between AMD and Intel would be expected.
Lowering Price Target to $22. We are lowering our price target to $22 from $28
based on the stock's 3-year price to sales average of 1.9 times. While we do
not believe that there is significant downside from current levels, we believe
that upside in the near to mid-term is limited given the competitive landscape. |
