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AMD’s shares rise on Bernstein upgrade

By Benjamin Pimentel, MarketWatch

SAN FRANCISCO (MarketWatch) — Shares of Advanced Micro Devices Inc. traded higher Monday, gaining as Bernstein Research raised its rating and said the chip maker has fixed a recent supply problem.

The stock added more than 3% at midday, as analyst Stacy Rasgon also argued that the Sunnyvale, Calif.-based company


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+3.40%



would get a lift from an expected “snapback” in demand in the second half of the year.


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AMD
7.29,
+0.24,
+3.40%



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INTC
26.70,
+0.0050,
+0.02%



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SOX
421.73,
+1.58,
+0.38%

“It now appears that AMD has secured the supply they need,” Rasgon wrote in support of the upgrade to outperform from market perform.

“This, coupled with an above-consensus view on demand into the back half of the year, and very respectable performance characteristics of Llano’s successor, Trinity, are enough to bring us back to the more positive side of the fence.”

Rasgon referred to AMD’s newest PC processor, part of its Fusion portfolio, a state-of-the-art processor that combines core computing with graphics processing capabilities.

AMD suffered a setback late last year when it announced that manufacturing problems at joint venture GlobalFoundries prevented the chip maker from producing Fusion chips in volumes needed to meet demand.

But AMD’s seen recovering from that problem. Rasgon said: “AMD’s recent results suggest that they have in fact solved the supply issues.”

The company also took a hit from disruption in the PC market caused by the hard disk drive shortage resulting from the Thailand flooding disaster.

But Rasgon said it looks like the PC market is poised to recover from that issue as well, projecting a “snapback in microprocessor sales in the back half of the year due to a recovery in HDDs.”

However, despite AMD’s gains, the chip sector headed south in Monday trading, as the Philadelphia Semiconductor Index


/quotes/zigman/1468249 SOX
+0.38%



 slipped 0.5%.

Benchmark Co. analyst Gary Mobley downgraded the sector to market weight from overweight previously, saying that “an upward inflection in a semiconductor mini cycle is already priced into the sector.”

“Within the past four weeks, investors have bid up shares of semiconductor companies based on signs of chip bookings acceleration as well as the belief HDD supply issues are no longer a headwind,” Mobley wrote.

The Philadelphia Index has gained more than 14% since the beginning of the year.

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Benjamin Pimentel is a MarketWatch reporter based in San Francisco.

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