Share in chip maker Advanced Micro Devices, Inc.(NYSE:AMD) ontinued to show record low on Wednesday after a downgrade by FBR Capital on Tuesday, which cut the target price of the stock to $6 from $7.50 earlier. However, the stock recovered from lows and managed to close higher by 1.22% to $3.32 after creating 3-year low of $3.22 earlier in the session.
Craig Berger, the FBR analyst, however maintained his stock rating at Outperform.
The main reason for the downgrade was the declining demand for personal computers as more and more people resort to tablets, smartphones and other mobile devices.
He said that the deterioration in manufacture of PCs and their sales was hurting AMD's second half business prospects.
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“It seems very well known that PC sales are suffering from weak macro demand (including China and Europe), a complete absence of any back-to- school goodness, tablet/smartphone cannibalization, and a production/sales ‘air pocket’ before the Win8 launch,” Berger wrote in his research note.
“Thus, we are cutting AMD’s financial estimates, taking Q3 sales to the low end of guidance, which now embeds a 20 percent year-over-year revenue decline.”
The declining demand for PCs has been seen in the results of desktop and laptop makers Dell and Hewlett Packard, both of which have cut their forecasts for the year while leading chipmaker Intel has also reduced its estimates.
Berger however noted that the company continued to generate cash and profits and he expected it to make a small profit in the second half of the year.
Berger trimmed his 2012 earnings forecast to 21 cents a share from 29 cents; for 2013, he now sees 10 cents, down from 28 cents. He expects profits a penny a share in Q3 and two cents in Q4, down from five cents and six cents, respectively.
Shares of AMD have fallen over 16% in the past one week after announcing the departure of its Chief Financial Officer Thomas Seifert.