Thursday, September 28, 2006

Calls of Note Part 2

- Citigroup is raising their estimates and price target on AMD (NYSE:AMD), reflecting solid PC environment and strength in AMD's OEM business Dell represents an obvious source of strength but upside comes from HPQ, who helped buoy 1H September Contrary to concerns over a price war, the 3Q06 pricing environment was relatively stable versus expectations. This and mix shift weighted toward OEM business drives them to increase 3Q06 GM estimate.

Raising 2007 estimates above consensus, reflecting 8M net new processors from Dell. AMD now gaining 170 bps of share in 2007. With a significant increase in estimates ahead, and positive news from OEM customers, the firm expects momentum to favor AMD shares through year-end. Raises price target to $31 from $27.50.

- Citigroup is also increasing estimates and price target (to $24 from $23) for Intel (NASDAQ:INTC) reflecting better PC environment for 3Q06. Gross margin remains unchanged as sales were dominated by lower margin Pentium D (resulting in share gain in the channel).

Revenue estimates 3Q06 to $8.6B from $8.4B; 2006 to $35.0B from $34.6B. GAAP EPS for 2006 to $0.81 from $0.79.

Inventories to not increase as much as expected given strong unit sales and increased production of chipsets. Solid outlook expected for 4Q06, reflecting seasonal PC trends, and improved gross margin outlook on Core 2 Duo push in the channel. Firm notes that while they were too early when they upgraded Intel, they believe the groundswell is forming for a turnaround in 2007. Firm confidently views Intel as a 12-month Buy.

Notablecalls: Not actionable but good to know. Citi's late. The stocks have made their moves.

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