) reported third-quarter EPS of 18 cents, vs. 12 cents, on a 23% sales rise. Jefferies keeps hold rating based on long-term concerns.
Analyst John Lau tells S&P MarketScope that although the chip maker's third-quarter was better than expected, gross margin improved less than 2% quarter-to-quarter, much of which was driven by memory products instead of microprocessors (MPU). He says MPU sales grew 26% quarter-to-quarter, but gross margin was not in proportion.
Lau thinks investors are taking profits since the dramatic rise from five months ago when stock was $15. He thinks MPU rivalry from Intel and higher depreciation will be issues in 2006.
He kept a hold opinion, and raised his price target to $22 from $18 based on the company's MPU business as stand-alone unit.
He sees 2005 EPS of 37 cents on $5.7 billion in revenue; and 2006 EPS of 76 cents on $6.7 billionin revenue.