Advanced Micro Devices
on Tuesday, and said the third quarter looks rosy for chipmakers.
Analyst Thomas Thornhill said in a report to clients that third-quarter earnings look "achievable" for semiconductor companies, based on pricing improvement for the industry. "This quarter will almost certainly be viewed as one that has been seasonally strong," Thornhill said, adding that the strength could be "more than just seasonal."
The analyst said that pricing power has been building up with the help of higher capacity utilization and low inventories in the computer industry, translating into stronger demand for chips. He expects average earnings growth of 11% for the sector, and growth of 8% if
earnings are excluded.
Thornhill upgraded Altera to buy from neutral, saying a 23% decline on the stock since Sept. 8 represents a buying opportunity. He noted the shares should be trading at par with
since both companies have similar outlooks.
UBS also raised its recommendation on AMD from reduce to neutral, citing strong growth in its flash-memory business, which is expected to yield a solid increase in third-quarter sales.
UBS owns Altera stock and expects to provide investment banking services to the company in the near future. UBS doesn't own stock in AMD and has no banking relationship with the company.
Shares of Altera were up 52 cents, or 2.9%, at $18.22, while AMD was up 33 cents, or 2.7%, at $12.49 in morning trading.