Wednesday, July 19, 2006

Pre - Conference Call

This quarter AMD will present about $0.29 EPS, substantially more than the $0.22 average the analysts expect.

But I am not sure that the surprise will matter. Last quarter, AMD also beat expectations, very well between guidance despite Intel's furious dumping, and yet the stock price slid 15% the following days, until the Dell announcement.

I have been thinking why AMD sells off after good concrete news, perhaps it is that the investors are holding counting on the news, the news come, but there is no reaction, and then they sell. For investors, AMD hasn't had an exit point, a period to reduce the interest on AMD for more than four months now, after significant events such as the earnings report, it is natural to not want to wait any longer.

Then, there is the issue of Intel promising to take over the world with Woodcrest/Conroe/Merom, the evident interest in Woodcrest processors, and most Wall Street analysts wondering whether the gamble of betting the whole company in the premiums of multiprocessor servers and the volumes of scarce profits that Woodcrest/Conroe/Merom and Pentium 4 dumping will leave for AMD uniprocessors.

I don't expect "an answer" to neither Conroe nor Woodcrest, if at all, to Merom with the new mobile architecture expected to debut one year from now.

Going back to the $0.29 EPS, further declines next quarter, and perhaps a "flat to slightly down" Q4 means less than $1.25 per year. At the current interest rate, the P/E multiplier should be about 17 for low risk stock market investments, think about it, $1.25 EPS at 17x P/E multiplier are $21.25 per share. But AMD is not a sure investment. So far, AMD has been growing and that's why it has been receiving far larger multipliers. But, will it keep growing?

Yes, AMD has much greater production capacity. Sad that it lost all pricing power in every uniprocessor segment.


Anonymous said...

Hi Eddie

Let us buy high and sell low. Great advise.


Eddie said...

What about buying low and selling even lower?.

How was I supposed to know that Bernanke was going to be soft at the Congress?