Advanced Micro Devices Inc.
) surged 11.8% to $4.45 as several analysts upgraded the stock's
ratings and price targets following its chip supply deals with
Advanced Micro has been providing chips for game consoles to
lower its dependence on the declining personal computer market.
The newly launched PlayStation 4 and new Xbox One video game
consoles will feature its processor.
AMD's graphics business remains sluggish. While the graphics
market itself has not done too well in the last quarter because
of sluggishness in both computing and gaming sales, NVIDIA
appears to have held up relatively better than the other players.
The graphics processor market shrunk 3.2% from the fourth quarter
of 2012 and 12.9% from the year-ago quarter. AMD's market share
has been sagging in recent quarters partly because of its own
miscalculations and partly because of inadequate inventories. But
the trend could be reversing, since there were some gains in the
last quarter. The company's game console wins and new product
releases could help it regain lost ground.
The company is also diversifying its business into new
embedded markets, including communication, industrial and gaming,
among others. Further, AMD is targeting the tablet, hybrid and
small-screen notebook segments with its Temash product family,
built on its low-power Jaguar cores. This could be a potential
growth driver for the company.
We believe that a more conducive market, new game console
wins, adoption of new products and good execution are expected to
help AMD deal with the PC market weakness.
AMD's revenues in the first quarter of fiscal 2013 came in at
$1.09 billion in the quarter, down 5.8% sequentially and 31.4%
year over year. The quarter's revenues were slightly better than
its guidance of a 9% sequential decline (at the mid-point). The
sequential decline was due to a 9% decrease in the Computing
Solutions segment, partially offset by a 3% increase in Graphics
Currently, Advanced Micro has a Zacks Rank #1 (Strong Buy).
Another stock that is worth considering is
), which has a Zacks Rank #1 (Strong Buy).
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