Advanced Micro's struggles have resumed.
AMD shares fell 12% Friday after the PC processor designer predicted revenues for its current quarter will fall 1% sequentially Thursday as it detailed a disappointing second-quarter.
The news led to a flurry of glum notes from analysts, who see AMD facing execution challenges amid a broader consumer-driven slowdown and pressure from its larger rival, Intel.
Vijay Rakesh, Sterne Agee warns soft demand and high-inventories could create headaches for Intel and AMD through the second half of the year:
We believe increasing PC processor inventories probably implies PC Chip OEMs will face uphill challenges from Pricing and high inventory and flattish to down Fab Utilizations.
Ambrish Srivastava of BMO Capital Markets slashed his price target on AMD shares to $5 from $6; and lowered his 2012 EPS estimate to $0.28 from $0.47 and his 2013 EPS estimate to $0.26 from $0.52:
AMD seems to be back in the mode of inflicting wounds on itself. After a down 11% q-q quarter in 2Q, the company is guiding lower vs.
expectations and vs. Intel, again. 3Q gross margin is guided to 44%, at the low end of the target range of 44%-48%. Channel inventory has built up an inventory skyrocketed on AMD’s balance sheet as well – up by 42% q-q and up 35 days q-q to 97 days.
Bobby Burleson at Canaccord Genuity downgraded AMD shares to ‘hold,’ from ‘buy,’ and reduced his price target on AMD’s shares to $5:
While valuation appears attractive on a price-tosales basis (0.6x), we are concerned that prolonged slow demand for PCs on tablet cannibalization may lead to sustained aggressive pricing from Intel and negatively impact AMD's gross margins and market share.
AMD shares were off 49 cents, or 12.04%, to $4.28 in mid-day trading Friday.
