According to AP: Stifel Nicolaus analyst Cody Acree upgraded the stock to a short-term "Buy" from "Neutral," and set a $17 price target on it. The reasons to justify the change of heart are thin. The research firm believes that AMD (AMD) may have gained a percentage point or two in market share from Intel (INTC).
But, at what cost? AMD’s gross margins are already razor thin. As customers weight for the company’s new chips, heavy discounting may have accounted for any improved sales. As ZDNet wrote recently: The company was already in the process of aggressively discounting its processors when it was forced into even steeper discounts when one of its customers, believed to be Dell, left it stranded with a bunch of unsold chips.
And, ongoing rumors that AMD may outsource its manufacturing have Wall St. concerned that the company will lose much of its flexibility in terms of changing over production to popular chips rapidly.
AMD is still in trouble, upgrade or no.
Douglas A. McIntyre
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