Morgan Stanley Stays Underweight AMD, Lowers Estimates Even More

In a report published Friday, Morgan Stanley analyst Joseph Moore maintained an Underweight rating on Advanced Micro Devices, Inc. (NASDAQ: AMD), with a price target of $2.25, citing the challenging PC environment.Analyst Joseph Moore said that the weaker PC environment in the first half of the year did not help the company in its drive towards profitability. The computing and graphic segment tumbled 29 percent sequentially and 54 percent y/y, marking the biggest decline in history in this segment. "We continue to see the company as structurally subscale in the microprocessor and GPU businesses, and think that the bull case (a sale of the company or split of the CPU and GPU business which AMD has not commented on) as unlikely," Moore added. The console business is tracking down 8 percent y/y, and "appears likely to stay at similar declines throughout the year, in line with our estimates but below management forecasts; we think that significant sell-through unit growth is offset by price declines, and tough comparisons with a channel fill year in 2014," the Morgan Stanley report stated.Advanced Micro Devices' balance sheet continues to be under pressure by ongoing losses. The company has indicated that if need be, it would "access the capital markets" to raise cash, without indicating whether it would be in the form of debt or equity.The EPS estimates for 2015, 2016 and 2017 have been reduced from $(0.48) to $(0.57), from $(0.40) to $(0.45) and from $(0.28) to $(0.33), respectively.