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September 8, 2010 8:19 AM EDT
FBR Capital Markets slashed its 2010 profit forecast and price target of Advanced Micro Devices (AMD), citing the chip maker's heavy consumer exposure.
The brokerage said while server strength is helping Intel offset consumer weakness, AMD's latest Magny-Cours server offering has seen less-than-stellar support from stalwart vendors like IBM and Oracle/Sun.
The brokerage added that strength in first-half PC shipments, increased use of ocean freight, and a sluggish U.S. and Europe combined to drive softness in the PC space.
FBR cut its 2010 earnings estimate of AMD to 48 cents a share from 60 cents a share (including stock compensation), while Street analysts' consensus expectation is at 52 cents a share.
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"For AMD, its 3Q revenue guidance (+5%-10% QOQ) could be at risk, particularly given AMD's heavy consumer exposure," analyst Craig Berger said in a note to clients.
Berger also lowered his price target on the stock to $10 from $11.
"While we remain neutral on AMD in the near term, we still think AMD could be an attractive story in early 2011," Berger said.
The analyst, who maintained his "market perform" rating on AMD, said AMD's business with Apple and its latest Fusion chip could bode well for the company.
Apple is using AMD graphics chips in its desktop PCs and will begin using them in notebooks in early 2011, the analyst said.
AMD is accelerating the launch of its 40 nm Ontario Fusion chip and Berger said AMD has real share gain opportunities with Fusion as Intel's graphics capabilities are nominal.
Shares of AMD were closed at $5.95 Tuesday on NYSE.
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