Bernstein Cuts AMD To Sell, Ups Intel To Hold Ahead Of Earnings

Research firm Bernstein downgraded chip maker AMD to Underperform, its equivalent of a sell rating, from Market Perform.
By The Fly Staff ,

Research firm Bernstein downgraded chip maker AMD (AMD) - Get Report to Underperform, its equivalent of a sell rating, from Market Perform. The firm upgraded Intel (INTC) - Get Report to Market Perform, its equivalent of a hold rating, ahead of earnings reports upcoming from the two chip making competitors.

AMD MAY NOT MEET EXPECTATIONS: AMD may disappoint investors going forward, warned Bernstein analyst Stacy Rasgon. The company's PC chips performed better than expected in the first quarter, but the outperformance was probably due to channel fill, the analyst stated. Moreover, at least one of the company's new semiconductor customers was a console maker, indicating that the win may not boost the company's results as much as expected, Rasgon wrote. Furthermore, use of AMD's Zen chip in servers probably won't increase significantly for about a year, and the company will have to consistently post better than expected results as the year progresses for the stock to advance, Rasgon stated. The analyst believes that there is a good chance that the chip maker's Q1 results will miss expectations, since Q4 contains an extra week which should hurt Q1 results, and the Street has a "reasonably strong" outlook for Q1 results. Rasgon kept a $3 price target on AMD shares.

INTEL UNLIKELY TO DISAPPOINT: There is a "relatively low" chance that either Intel's Q2 results or its Q3 guidance will miss expectations, Rasgon believes. The recent PC market recovery will boost Intel, although the resurgence will probably prove to be temporary, the analyst stated. The chip maker's top line will be boosted in the second half of 2016 by its new deal - which has been widely reported but not confirmed - to supply chips for Apple's (AAPL) - Get Report iPhone, he wrote. However, Rasgon indicated that he believes that PC sales, and by extension, Intel, could be hurt by a rising U.S. dollar in the second half of this year. Rasgon raised his price target on Intel shares to $30 from $26.

PRICE ACTION: In early trading, Intel rose 1.7% to $33.75 while AMD was flat at $5.02 per share.

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