Sterne Agee Downgrades Advanced Micro Devices to Neutral

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On Thursday, global semiconductor company Advanced Micro Devices
AMD
was
downgraded
to Neutral with an $8.50 price target by Sterne Agee. Sterne Agee analyst Vijay Rakesh said in his research report that, while the bank has been positive on AMD for a long time, and while the company is performing well, he believes that upside is going to be limited by the slowing PC market. "While AMD has outperformed the SOX in 1H12, it is down significantly from its YTD peak," said Rakesh. "Our checks with PC ODMs are showing JunQ has trended modestly lighter and current July-Aug builds are tracking flat q/q (versus up 10-15%) ahead of the Win8 transition. Builds should pick up in late September for Win8, but ODM-OEM expectations of actual Win8 sellthrough are more muted." Rakesh continued, "We believe while AMD should be able to show market share gains in the NB-DT market, key to the AMD story will be delivering EPS leverage with improving GM and more aggressive Opex restraints. We are downgrading AMD to a Neutral, as we think a slower PC market in 2H12 ahead of 1)Win8 launches, 2) ultrabook-tablet ramps and 3) a slower macro will limit outperformance." In a June 27 earnings preview, Citibank echoed those sentiments, saying that, "Investors viewed the dissemination of AMD's earnings date as the 'all clear' for 2Q12 results. And while we acknowledge that this is generally true, our impression is that the weakening PC environment, combined with Intel product launches in the latter half of the quarter, likely impacted AMD's June." However, if AMD needs any proof that things could be worse, it need only look at Intel
INTC
. After Intel was fined $1.33 billion for using rebates to block rivals, it has spent its holiday week desperately trying abate reputation losses. According to
Bloomberg
, Intel lawyer Nicholas Green said that the case, "is utterly hopeless and should never have been brought." On Thursday, Advanced Micro Devices traded at about $5.89, down roughly 2.3 percent.
Follow me @BCallwood.
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