Thursday, January 19, 2006

AMD saves the day for global stock market

The global stock market was on a crash course yesterday after INTEL reported worst earnings for Q4 2005 and worse outllok for Q1 2006. Investors don't seem to believe Paul Otellini's claim that INTEL will gain share in 2006: people just don't see how.

However, after AMD reported 35% Q/Q growth and projected 70% Y/Y growth for Q1 2006, and IDC reported 17% increase in global PC sales, the market rebounded in a lot of joy, as people found the missing money. AMD's stock rose more than 11% and its target price was raised from $40 to $55.

AMD now has 1/4 of INTEL's market share and 1/9 of INTEL's market cap, and AMD is on the way up with its 5 year lead in technology. AMD's fair value should be around $50 as of today.

"AMD is seen as a bellwether and its outlook was enough to make investors overlook a dimmer forecast from Apple Computer Inc.", AP wrote.

Meanwhile, Prudential cut INTEL's target price to $17 and urged INTEL management to take a better look at its product lines and correct its miscalculations in financial projections in the wake of an industry wide shift to AMD64 technology.

Morgan Stanley raised AMD's target price to $55- $70 based on projected price/sales ratios.

Merrill Lynch, who downgraded AMD to sell just two days ago, admitted that they "have been surprised – blown away is more like it – by the extent of the company's gains".

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