AMD: The Chips are In

03/03/2006 12:00 am EST

Focus:

It is rare indeed to see such an illustrious list of top-notch advisors agree on the outlook for one particular stock. Here, Bernie Schaeffer, Louis Navellier, George Gilder, and Vahan Janjigian all "chip in" with comments on chipmaker, AMD.

(For more on the advisors cited below, please cllck on their photos.)

Janjigian, VahanVahan Janjigian, editor of The Forbes Growth Report notes, "About 65% of 2005 revenues for Advanced Micro Devices (AMD NYSE) came from microprocessors, the computer’s ‘brain’. AMD’s microprocessors are used in desktop and mobile computers, servers, and workstations. Dual-core processors consist of two processor cores cast on one semiconductor die. They improve transistor density while minimizing power usage.

"Flash memory, which generated 33% of 2005 sales, can retain information even after the power supply is shut off. Flash memory is used in all kinds of electronic devices including mobile phones, digital cameras, DVD players, MP3 players, and car navigation systems. It is also used in personal digital assistants, USB drives, and memory cards, which are used in media players and digital televisions.

"AMD struggled with falling memory product sales in 2004. However, things turned around in 2005. Key client wins came from AIG, Albertson’s, Nissan Motor, and Clear Channel. AMD also benefited from strong growth in China. Management is focused on growing market share to 25-30% by 2009. Sales for the current quarter are expected to be up about 70% year-over-year. Right now, AMD has the momentum in its continuing battle with Intel."

Gilder, George"Advanced Micro is a paradigm play on Internet compatible processors," notes tech expert George Gilder, editor of The Gilder Technology Report. "Say you’re a PC maker with orders to fill. That’s good news, until you discover that you’re short chipsets from Intel and are stuck with Intel microprocessors you can’t use. What do you do? You turn to AMD, of course. AMD is giving Intel the run as investors flee the floundering giant for its nimbler nemesis.

"In January, Intel reported a disappointing fourth quarter and blamed it on a shortage of chipsets and weak PC sales. The day after the Intel report, AMD boasted that its share of the microprocessor market had surged to 16.3% in the quarter, up sequentially from 11.9% and from 9.6% in the year-ago quarter. And in a virtual declaration of war, CEO Hector Ruiz targeted a 25–30% market share by 2008. Investors aren’t waiting for the final gunshot, as the stock has been rising since."

Navellier, LouisAdds Louis Navellier, editor of The Blue Chip Growth Letter, "AMD has made significant advances in its epic battle with Intel. And while it is a distant second in this industry, it continues to fight to gain market share. But what I really like about AMD is that it also manufactures flash memory chips, which are experiencing explosive growth from usage in cellular phones and digital cameras.

"As a result, AMD's fourth-quarter sales surged an incredible 46%, far exceeding analysts’ expectations. Obviously, Wall Street underestimated the company’s booming business in flash memory and communication chips. The stock is great buy in the Moderately Aggressive category."

Schaeffer, BernieBernie Schaeffer, editor of The Options Advisor, explains, "Advanced Micro Devices remains lost in the shadow of Intel, despite impressive price action that leaves its larger competitor in the dust. The maker of microprocessors has gained 186% since last April, mounting a solid rally along its ten-week and 20-week moving averages. In recent trading, AMD notched a 5-1/2-year high and surged through the 40 strike, which represents peak front-month call open interest.

"The shares continue to look promising from a contrarian perspective, as skepticism lingers despite the stock's months-long uptrend. Analysts maintain 11 ‘hold’ ratings and five ‘strong sells,’ any of which could be converted to upgrades, providing additional strength. Further, a 21.5% increase in AMD short interest this month left more than five percent of the stock's float sold short, which could be the foundation for a short-covering rally. Options traders can buy the July 35 call."

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