Tuesday, May 22, 2007

It boggles the mind - Part 2

A few days ago I had written part 1 of this post about how Doug Freedman at American Technology Research (ATR) had made a buy rating on AMD as a result of his belief that AMD will now lose a little less money than he had earlier anticipated. I then heaved into the credibility of the Wall Street hacks. I thought I'd have a look at Mr Freedman's track record to make my point:

January 12th, 2007 - - Mr Freedman releases a report headlined...

Advanced Micro Devices, Inc. ($20.18, Buy)
(AMD: We Think the Bottom is Near; Street Numbers Likely Move Close to Our Preview)
Investment Opinion: Maintain Buy rating as opportunity presents itself; we are active buyers at $18.

His EPS projection for FY07 is +77 cents (down from +80 cents) and his 1Q07 forecast is +10 cents (down from +11 cents).


January 24th, 2007 - Mr Freedman next releases the following report...

Advanced Micro Devices, Inc. ($17.51, Sell)
(AMD: Extreme ASP Erosion Leads to Disappointing Gross Margin Results and Outlook)
Investment Opinion: We are downgrading from Buy to Sell and reducing our price target from $27 to $12

His EPS projection for FY07 is now 7 cents (down from 77 cents) and his 1Q07 forecast is -22 cents (down from 10 cents).

His opening para in that report would have got most regular people fired but I guess Wall Street has different rules:


"We have clearly been wrong over-weighting the fundamental market conditions and have missed the bold fact that both sides are simply growing units at the expense of ASPs."


(Which is hogwash considering Intel's ASPs rose in Q406 and are holding stable still.)


April 9th, 2007 - in his next report Mr Freedman now proclaims...

Advanced Micro Devices, Inc. ($12.86, Sell)
(AMD: Is This A Sign We Hit Bottom? We Wish It Was - But Still Need Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.

His EPS projection for FY07 is now -83 cents (he has removed his previous numbers from this report) and his 1Q07 forecast is -34 cents (previous number removed).


April 16th, 2007 - here we go...

Advanced Micro Devices, Inc. ($13.57, Sell)
(AMD: Pre-announcement Leads to Numbers Cut; Reinforces Need for Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.

His EPS projection for FY07 is now -$1.82 (down from -83 cents) and his 1Q07 forecast is -82 cents (down from -34 cents).


April 20th, 2007 - he now says...

Advanced Micro Devices, Inc. ($14.28, Sell)
(AMD: "Something of a Perfect Storm" Hits AMD Results)
Investment Opinion: We maintain our Sell rating and $12 price target as the company faces an uphill battle against a revitalized 45nm wielding Intel.

His EPS projection for FY07 is now -$2.41 (down from -$1.82) and 1Q07 comes in at -$1.01 (against his final forecase of -82 cents).


May 14th, 2007 - we finally come to the report which started my tirade...

Advanced Micro Devices, Inc. ($14.68, Buy)
(AMD: Upgrading to Buy from Sell, Time for a Tradable Rally)
Investment Opinion: Upgrading to Buy from Sell and increasing our price target
to $18

His EPS projection for FY07 is now -$2.27 (up from -$2.56) and 2Q07 forecast is -73 cents (up from -89 cents).


So back to my rant. How on earth does anyone buy on the predictions of these analysts??? The same guy has gone from a Buy at $20 to a sell all the way down to $13 and has catalysed a short term uplift for the stock by creating a Buy rating at $14.68. His EPS estimates have consistently been off. His ratings are just whacked. From a Buy at $20.18 going to a Sell all the way down to $12.86 and becoming a Buy at $14.68. I thought you were supposed to buy low and sell high. Someone needs to inform Mr Freedman that his job is give his clients the info to do this.

Now I know you can't always get it right. But come on...this is the job for which Mr Wall Street gets paid millions of $s. And the basis for the last recommendation to buy till $18 just amazes me. As far as I'm concerned, these guys are mostly a bunch of quacks or simply duping average Joe's who blindly follow the recommendations of the so called Pundits of Wall Street.

2 comments:

Roborat, Ph. D. said...

i think it's obvious...

Mr Freedman bought AMD at $35.

Scientia from AMDZone said...

I wouldn't reccomend buying AMD yet. As far as I can tell, AMD could easily fall further in Q2.