Markets & Finance

Analyst Actions: AMD, Novellus Systems, First Marblehead


From Standard & Poor's Equity ResearchCITIGROUP CUTS ESTIMATES, TARGET FOR ADVANCED MICRO DEVICES

Advanced Micro Devices (AMD) sees first quarter revenue down 15% sequentiallly. Citigroup analyst Glen Yeung says first quarter weakness predominantly in the U.S. market and pricing also played role. He widens $0.45 first quarter loss estimate to $0.56 loss.

Yeung believes a source of the company's shortfall is Dell's (DELL) decision to reduce its exposure to AMD; he thinks AMD's shortcomings in two flagship products was the likely sore spot for Dell. He thinks AMD shortfall, and his checks in Asia and elsewhere suggest Intel (INTC) is gaining market share, and says the most recent checks point to Intel's continued strength in flip chip demand, even entering the second quarter.

He widens $0.83 2008 loss estimate for AMD to $1.24 loss, and cuts $0.30 2009 EPS to $0.28 EPS. He cuts 8.50 price target to 7.50. He keeps hold rating.

GOLDMAN CUTS ESTIMATES, TARGET, KEEPS SELL ON NOVELLUS SYSTEMS

Goldman Sachs analyst James Covello says Novellus Systems' (NVLS) EPS shortfall was driven by less favorable product mix, larger spending in industrial applications segment, higher taxes, inventory write down. He cuts his estimates, primarily on lower margins: $0.90 2008 EPS estimate to $0.65, $1.05 for 2009 to $0.90 and $1.45 for 2010 to $1.35. He keeps a sell opinion.

While he expects aggressive inventory correction to lead to improved semi fundamentals in the second half of 2008, Covello does not expect sequential recovery in fundamentals until mid-2009. He expects DRAM and foundry orders to remain weak through most of 2008, and believes there is incremental risk to NAND orders in the second half of 2008, driven by excess supply and deteriorating margins.

He cuts his 6-month price target from 20 to 18.

FRIEDMAN BILLINGS SAYS TERI'S BANKRUPTCY FILING SHIFTS CREDIT RISK TO FIRST MARBLEHEAD

Friedman Billings analyst Matt Snowling says that back in November, he had concerns regarding Education Resource's (TERI) limited ability to cover losses out of its reserves. Now the value of First Marblehead's (FMD) residuals are questionable, as losses once thought to be covered by TERI shift back to the company.

Snowling believes this can be overcome by retaining higher segregated reserves at a trust level on future securitization, but risk to capital likely restricts its access to funding further. Given $4.85/share after-tax value of residuals receivables to existing $9.58/share book value, continued lack of visibility on the company's ability to generate cash earnings, he believes impaired book value appropriate valuation. He keeps 6.50 price target and underperform on First Marblehead.


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