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Stock Analyst Update

Advanced Micro Devices Might Be Too Cheap to Pass Up

Chipmaker overcomes weakness in Europe and posts another solid quarter.


What Happened?
Advanced Micro Devices (AMD) on Wednesday reported third-quarter earnings of $0.64 per share, excluding one-time special items, beating First Call consensus estimates of $0.62 per share. AMD also delivered flat top-line growth in the quarter, which was not a surprise given the firm's sale of its communication division.

What It Means for Investors
Although Advanced Micro Devices' earnings weren't wildly above Wall Street expectations, the firm posted a solid quarter despite a challenging demand environment overseas. In contrast with industry leader Intel's (INTC) earnings warning a few weeks ago, AMD's third-quarter performance yet again showed the strength of its current product lineup. Indeed, with 6.9 million units of chips sold, the company probably showed some market share gains against Intel. AMD's high-end Athlon processor continues to be a threat--especially against Intel's Pentium 3 and in light of the latter firm's recent supply constraints. AMD also has a compelling chip for the value PC market, which we believe will perform very well against Intel's comparable product.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.