Technology

Analysts Take Very Mixed View of Sudden AMD CEO Change

Advanced Micro Devices Inc. (NYSE: AMD) has not handled very well to the sudden and unexpected news that Rory Read is stepping down as chief executive of AMD. While the replacement by Dr. Lisa Su was called a succession plan, the SEC filing showed that Read and Su were both still in negotiations over their packages. The long and short of the matter is that this means the succession likely came to a head rather quickly. The company made a slightly different case.

It turns out that we are not the only ones questioning the timing. Analysts have chimed in on Read’s departure and Su being appointed as CEO. For whatever it is worth, AMD shares were challenging $3.00 premarket, and the stock hit a new 52-week low of $2.97 after the open on Thursday. Stocks hitting 52-week lows are not exactly ringing endorsements.

24/7 Wall St. has received several analyst reports opining on the transition. One of the very negative calls was from Wedbush Securities, which downgraded AMD to Neutral from Outperform and slashed the price target to $3 from $6 in that call. Wedbush also removed AMD from its key Best Ideas List. So, outside of that downgrade, there are several other mixed analyst reports covering the new AMD.

Bank of America Merrill Lynch said the new CEO is good choice, but the firm said it is questionable timing. Merrill Lynch has an Underperform rating on AMD, but it maintained a $4.00 price objective. The report said:

AMD abruptly announced the promotion of its current COO Lisa Su to the role of President and CEO, replacing Rory Read who had been in the CEO role for only ~3 years. We view Dr. Su’s selection very positively and believe she is immensely capable in products, technology and execution. However we question the timing of the announcement, just a week prior to Q3 earnings call and can only assume it potentially presages weak results/guidance and possibly indicates further restructuring/asset divesture actions in the core PC/graphics business that accounts for ~70% of sales. Note AMD did not update financial guidance on the CEO transition call. We maintain Underperform on AMD and highlight incremental positive for rivals Intel and Nvidia. … Until we see Q3 results/Q4 guide, it’s hard to call for a possible near-term bottom in the stock. However, we do positively note the company’s strong actions to shore up its balance sheet and cash position could provide some support to the stock.

Canaccord Genuity has a Buy rating and a $4.50 price target on AMD. The firm said that there is long-term value but noted that headwinds remain during this transition. Canaccord further anticipates PC-exposure of less than 50% by the fourth quarter of 2015 as gaming and embedded sales increase. Still, it noted that AMD is significantly underexposed to the recent enterprise PC strength and Intel is adding pressure.

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