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.
Showing posts with label stock. Show all posts
Showing posts with label stock. Show all posts
Tuesday, May 22, 2007
Friday, May 11, 2007
AMD lay offs
As I had predicted, AMD has laid off 430 people or as they say 2.6% of their workforce.
Link
However, this is probably not enough and they will need to bring their employee base down closer to 15k people from the 16.5k they had post the ATI merger very quickly.
AMD also filed their 10Q today. While we already calculated the true loss to the CPU biz, it also reveals a 10% decline in ASPs.
Link
AMD management is handing out some blatant horse's manure. At the analyst call they said inadequate supply to channel and that the Q1 inventory build up was desired. Huh - if they had inadequate supply, why is it Q406 inventory was stable at the same level compared to the period when AMD was selling out and make solid profits. You can read more about my assessment on the inventory:
here...
Essentially, AMD is seeing soft demand because they have non competitive parts and by pulling the Pentium brand down the pricing stack Intel has made it difficult for them to sell even when they are almost giving the product away for free.
What baffles me is how the Wall Street hucksters continue to prop the stock up at 13.50+. But I guess the guys who bought at 40 have no choice but to pour good money after bad to try and keep their investments afloat for as long as possible.
Q2 - expect AMD to lose a big dollop of change again. Not as much as Q1 but probably half or a little more than half of their Q1 loss.
Link
However, this is probably not enough and they will need to bring their employee base down closer to 15k people from the 16.5k they had post the ATI merger very quickly.
AMD also filed their 10Q today. While we already calculated the true loss to the CPU biz, it also reveals a 10% decline in ASPs.
Link
AMD management is handing out some blatant horse's manure. At the analyst call they said inadequate supply to channel and that the Q1 inventory build up was desired. Huh - if they had inadequate supply, why is it Q406 inventory was stable at the same level compared to the period when AMD was selling out and make solid profits. You can read more about my assessment on the inventory:
here...
Essentially, AMD is seeing soft demand because they have non competitive parts and by pulling the Pentium brand down the pricing stack Intel has made it difficult for them to sell even when they are almost giving the product away for free.
What baffles me is how the Wall Street hucksters continue to prop the stock up at 13.50+. But I guess the guys who bought at 40 have no choice but to pour good money after bad to try and keep their investments afloat for as long as possible.
Q2 - expect AMD to lose a big dollop of change again. Not as much as Q1 but probably half or a little more than half of their Q1 loss.
Sunday, April 22, 2007
AMD - cash and debt management
There's an interesting story here on the restrictions AMD has from any further funding they may raise in the market:
AMD fund raising restricted
After their abysmal quarter, AMD's stock price shot up on the speculation of a private equity buy out rumor that's been floating around. However, a cursory look at their Q107 consolidated balance sheet shows that at current stock prices AMD is not really worth buying if the intent is to re-sell the assets unless someone thinks they can sell the IP inside the company. The other reason a private equity firm may be interested is if they think they can turn the business around. However, for a company that's already lost $1.11 in the first quarter and nowhere near any kind of profit, again this requires a huge leap of faith. Now these kind of long shots are ok when the deal is a few hundred million. But we're talking something that could end up being a close to 10 billion $ deal. Even though the guys with the money live on planet "unreal", I think there are limits to their insanity. Also, shareholders will be pissed that they are having to sell when the stock is $14...when barely a year ago it was $40.
But the real issue here is if there's no private equity deal, then AMD has to raise 2X the amount of money they actually need. And this time round the money will not be as cheap as it was when they were making profit and the stock was seeing the good times.
I have been saying since the announcement of the ATI deal that AMD would have a difficult time managing cash and debt. It feels to me that AMD management was pretty confident they would continue to make money and not have to raise further debt when they closed the deal with Morgan Stanley. The same sense of infallibility seems to be pervading how they have been guiding the market on quarterly results since the December analysts call. And it seems like they have not learnt their lesson and continue to guide flat to up for Q2. It appears they have painted themselves into a corner and if they do dilute shareholder equity through a share offering, I can see some ticked off institutional investors demanding that heads roll.
AMD fund raising restricted
After their abysmal quarter, AMD's stock price shot up on the speculation of a private equity buy out rumor that's been floating around. However, a cursory look at their Q107 consolidated balance sheet shows that at current stock prices AMD is not really worth buying if the intent is to re-sell the assets unless someone thinks they can sell the IP inside the company. The other reason a private equity firm may be interested is if they think they can turn the business around. However, for a company that's already lost $1.11 in the first quarter and nowhere near any kind of profit, again this requires a huge leap of faith. Now these kind of long shots are ok when the deal is a few hundred million. But we're talking something that could end up being a close to 10 billion $ deal. Even though the guys with the money live on planet "unreal", I think there are limits to their insanity. Also, shareholders will be pissed that they are having to sell when the stock is $14...when barely a year ago it was $40.
But the real issue here is if there's no private equity deal, then AMD has to raise 2X the amount of money they actually need. And this time round the money will not be as cheap as it was when they were making profit and the stock was seeing the good times.
I have been saying since the announcement of the ATI deal that AMD would have a difficult time managing cash and debt. It feels to me that AMD management was pretty confident they would continue to make money and not have to raise further debt when they closed the deal with Morgan Stanley. The same sense of infallibility seems to be pervading how they have been guiding the market on quarterly results since the December analysts call. And it seems like they have not learnt their lesson and continue to guide flat to up for Q2. It appears they have painted themselves into a corner and if they do dilute shareholder equity through a share offering, I can see some ticked off institutional investors demanding that heads roll.
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