Wells Fargo Upgrading AMD

Wells Fargo is out with a research report on AMD (NYSE: AMD) and is upgrading shares to Outperform and it has a $6-$7.50 price target on shares.

In a note to clients, Wells Fargo writes, "AMD's guidance for sequential sales growth in the December quarter suggests to us that AMD has to some extent managed to adjust for its Llano yield problems, and also to improve Llano yields. AMD's ability to hold down operating expenses builds our confidence in the company being able to remain profitable and generate cash as it moves through the current soft patch. The sharp drop in AMD's internal inventory minimizes AMD's inventory risk. 10% sequential growth in AMD's graphics revenues suggests to us that AMD maintained, and possibly gained discrete graphics share in the most recent quarter. AMD's microprocessor ASP rose (by, we think, perhaps as much as 10%) while Intel's was flat sequentially, showing a good pricing environment for microprocessors. HP announced that it has decided against divesting its PC division. We consider this to be positive for AMD as, in our view, HP has in the past demonstrated a clear inclination to offer both AMD-based and Intel-based computers. This has had the effect of supporting AMD's processor market share. AMD's stock has dropped to a point from which we believe there is good upside to the midpoint of our valuation range."

Shares of AMD are up 56 cents to $5.81, a gain of over 10% in pre-market.