NEW YORK (TheStreet) -- Shares of Advanced Micro Devices, Inc. (AMD) - Get Report are tanking, down 6.4% to $3.07 in early market trading after the company was downgraded to "neutral" from "outperform" by analysts at Wedbush following the company's CEO transition announcement
Wedbush analysts said the timing of its CEO changes a week ahead of its earnings report seems rushed, and lowered its price target to $3 from $6.
AMD announced that President and CEO Rory Read has stepped down, and that Lisa Su has been appointed to replace him, effective immediately.
The firm noted the leadership change could be a sign that AMD's turnaround may be taking longer than anticipated.
Wedbush said it expects in-line third quarter earnings and revenue, but lowered its fourth quarter guidance.
The firm now expects earnings of 4 cents per share, down from its previous 8 cents per share, and lowered fourth quarter revenue estimates to $1.44 billion from $1.9 billion, both falling below the consensus estimates of 5 cents earnings per share on $1.49 billion in revenue.
Separately, TheStreet Ratings team rates ADVANCED MICRO DEVICES as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ADVANCED MICRO DEVICES (AMD) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 24.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ADVANCED MICRO DEVICES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ADVANCED MICRO DEVICES continued to lose money by earning -$0.11 versus -$1.59 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$0.11).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, ADVANCED MICRO DEVICES has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The debt-to-equity ratio is very high at 4.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AMD's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
- AMD has underperformed the S&P 500 Index, declining 13.08% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: AMD Ratings Report