Q4 Preview: Future in Flux for AMD (AMD)

Shares of Advanced Micro Devices Inc. (NYSE: AMD) are down $0.12 o $7.99 in midday market movement on Wednesday ahead of the company's fourth-quarter earnings release scheduled for after the close on Thursday.

The world's No. 2 microprocessor manufacturer is expected to report fourth-quarter earnings of $0.11 per share of sales of $1.63 billion.

Last week the company gave preliminary sales for the fourth quarter of $1.65 billion, up 2 percent from the previous quarter.

In the third quarter, AMD reported earnings of $0.15 per share, beating the analyst estimate of $0.06 per share. The company reported third-quarter revenue of $1.62 billion, ahead of the consensus of $1.61 billion.

Since the start of the fourth quarter, shares of the company are up $1.04 or 14.96 percent. Since the same time last year the stock is down $1.02 or 11.32 percent.

A valuation shows that AMD is going for a forward P/E of 4.94x full year estimates. This compares to rival Intel Corp. (NASDAQ: INTC) at 10.22x.

Data from Bloomberg shows that 7 analysts have a Buy rating on the stock, 19 have a Hold and 7 have a Sell. The average analyst price target on AMD is $9 with a target range of $5 to $14.

Analyst comments:

Wedbush maintains a Neutral rating on AMD with price target of $8 on the stock, as the firm seeks more visibility from the company on Thursday as to the direction it is taking.

Wedbush analyst says, "Our LT thesis remains unchanged after reviewing initial Fusion (Zacate) test data, confirming our previous view of mixed CPU performance but also showcasing significantly better gaming and graphics. We continue to expect a market share re-balancing throughout 2011, with notable gains in netbooks and low-end low-power notebooks."

Williams Financial upgraded AMD to Buy from Hold on Tuesday while setting a price target of $12.

Williams analyst says, "In our view there are several opportunities for positive catalysts, the largest being a gradual improvement in the health of the computing market, which appears to have troughed during the fourth calendar quarter. Although the departure of CEO Dirk Meyer creates a level of uncertainty, we believe it also presents an opportunity for investors to participate in a reinvigorated AMD that will likely have a much more aggressive approach to notebook and tablet computing, particularly with the strength of Fusion."

JPMorgan maintains a Neutral rating on AMD with a price target of $6.50.

JPMorgan analyst says, "We are not changing our model at this time as AMD’s preliminary results are roughly in line with our revenue and gross margin estimates of $1.6 billion and 45.0%."

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