Longbow Research’s Joanne Feeney this morning raised her rating on Advanced Micro Devices (AMD) to Buy from Hold, with a $10 price target, writing that the company has “finally cleared the supple headwinds that constrained its performance in 2011.”
2012′s chip production capacity for AMD will be 50% hiher than it was in 2011, she estimates, as several measures put in place with foundry partner GlobalFoundries appear to have relieved last year’s problems, she writes, citing her own “checks”:
Checks with contacts indicate that GlobalFoundries yields for production of Llano and Trinity have risen by at least 50%. From 1Q11 to 4Q11, AMD�s notebook processor shipments rose 48%; some was TSMC output, but that was especially strong in 1Q, so growth from beginning to end was dominated by the Llano ramp; Yield improvements helped to drive an 80% Q/Q increase in GF supplies of Llano in 4Q11; Contacts confirm that Trinity production yields will begin at current Llano yield levels; New staffing at GF�s next-generation site in upstate NY points to recent acceleration in progress towards achieving 28nm production, so look for more consistent supply conditions in 2013. Recall that AMD pushed out its planned use of GF�s 28nm manufacturing to reduce its risk exposure.
But the story also appears to be positive operational changes coinciding with the appointment last year of�CEO Rory Read, she writes:
Improved execution is being brought to fruition by the new management team at AMD. Changes in internal organization, incentives, and responsibilities are improving quality control and bringing consistency to roadmap progress and product delivery schedules. Look for this to strengthen adoption of AMD processors by PC customers.
Feeney raised her estimates on AMD to $7 billion in revenue this year and EPS of 82 cents, excluding some costs, up from a prior $6.9 billion and 71 cents; and for 2013 she’s estimating $7.7 billion and $1, up from $7.6 billion and 89 cents.
Those numbers are quite a bit higher than the $6.6 billion and 50 cents the Street is modeling this year, and the $6.7 billion and 65 cents the Street is modeling next year.
AMD shares today are up 12 cents, or 1.7%, at $7.04.
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