ywfowler:
"What if it posts $0.33 but the stock price goes down to $17?"
As we've seen already, "market risk" is a nasty beast causing major pricing distortions in the equities of companies within like sectors...For example, just no way that INTC looking at Y2001 of $0.64 vs. AMD Y2001 at $2.00 should command a premium, particularly when one factors in the current growth and financial performance trends that have developed over the past year...It is probably worth noting that the general perception of AMD's outstanding fundamentals has been pricked by the Alcatel suit, the currently MIA 1 gig mobile palomino and the European based complaint against iNTC...the brutal negative reaction (i.e AMD decline from $30 to $20), as is becoming all to common in the currently bleak, for almost all companies (not AMD, though, imho) general market environment, may just be a wild overreaction, once again for the following reasons:
1) AMD's long term flash contracts have been in place for the better part of 2 years already as most, with perhaps the exception of Alcatel, expire in Y2001 as far as I know, which, if true, precludes the likelihood of any further welching on contracts by customers. AMD management at the time of the Alcatel suit stated that customer relations with their other long term customers remain on solid footing...and that the Alcatel impasse would not alter financials to any significant extent. (After all, the suit seems to be fairly well supported).
2) The palomino family of processors represents an important phase in the evolution of AMD to say the least. That AMD claimed to be shipping palomino based mobiles in March and that none so far have surfaced (Apr. 6) creates negative uncertainty around the overall prospects for this important family of processors, and, once again in this negative market environment, no mercy has been shown...Imho, once again, delays, although seemingly avoidable by more conservative management guidance, are the norm in this industry...Having said that, I suspect that palomino mobiles and servers will surface as stated by management in April, which if true, should provide a significant change in investor perception and consequently a nice boost in AMD price.
3) The European complaint against INTC, which seems to include AMD's involvement, may imply to some that AMD's European distribution channels are being blocked by INTC's aggressive (but fair???) marketing practices...Undoubtedly, INTC is running scared in Europe, and given the price/performance advantages of products offered by AMD, on any level playing field which this complaint will ensure, the laws of economics dictate continuation of AMD market share growth!!! As with Alcatel, AMD wants to ensure objectively that the rules are fair and applied equally to all parties!!!
4) That AMD did not find a need to alter its latest earnings guidance, contrary to just about every other company out there, strongly suggests to me that AMDwill post very decent Q1 results...
Two major risks for an equity: market risk and fundamental risk...It is my perception that were market risk neutral, AMD'd be at $40, even with the 3 current uncertainties as outlined above, based upon AMD's current fundamentals...Unlike kash, I anticipate an AMD Q1 that is upbeat (i.e $1.2 billion in rev's and $0.33 (actually I'm looking for $0.40) or better eps) and a cautious but optimistic forward guidance...After all, Dresden's incremental production for the rest of Y2001 is about 8 million units assuming Dresden ramp is completed by the end of the year...The mix of these incremental units will comprise 1 gig plus Athys and palomino family processors thereby reaping incremental revenues of $1 billion, or stated another way, assuming, pessimistically, that Q1 revenues are $1 billion which represents the baseline for the remaining quarters, then AMD's Y2001 revenues even without Duron and flash growth are $billion (4 x baseline of $1 billion) plus $1 billion stemming from incremental Dresden output, or a total of $5 billion in Y2001 (i.e 10% growth)...Imho, the existing $20 price is discounting a y/y 25% decline in revenues (keying off INTC's guidance of Q4/Q1 sequential 25% decline in revenues) or anticipating about $4 billion in Y2001 revenues...(Anything is possible to be sure, but my data suggests that $6 billion is a whole lot more likely than $4 billion)...I think kash's data suggests $4 billion, if I iinterpret his posts accurately...In any event, Q1 results will no doubt provide additional filler to reconcile kash's/my very differing most likely future scenarios...With any luck, we might even receive some hard data about the palomino family of processors on or before AMD posts Q1 results...
Difficult environment at the moment to be sure...Any company that can post decent quarterlies in this environment desrves to be well rewarded...My data suggest that AMDis one of a very, very small number of companies who are likely to post a decent Q1!!! |
