When Wall Street analysts speak, they often move stock prices. An upgrade here, a downgrade there, and some harsh or friendly words can make all the difference between a market-beating day and a short-term disaster. We often poke fun at analysts here at the Fool, but their market-moving powers can't be denied. And sometimes they come up with some fine insights to boot.
So what happens when two analysts take opposite views of the same stock? That's what happened to Advanced Micro Devices
The bear case
Alex Gauna of JMP based his downgrade on signs that AMD's long-awaited Fusion chips are failing in the marketplace. Not only do his checks indicate that system builders are "unsupportive" of the new chips, but he posits that ARM Holdings
That's the power of Microsoft's
As for the current lack of leadership, Gauna shrugs his shoulders: "The primary investment criterion in AMD is takeout potential, for which the filling of the CEO position has little relevance."
The bull case
Longbow's JoAnne Feeney rushed to rebut these and other claims, one by one. AMD's Fusion chips are holding their own in both reviews and sales, she says. Intel's high-end processors are currently spanking AMD's best, but "AMD is not aiming this product at that market -- it is targeted to the mainstream consumer, not a buyer willing to spend $1,000 or more on a laptop."
Feeney's target price on this $6.75 stock is $12 per share; Gauna is looking for $4.50.
The Fool take
So what do we investors make of this slapfight between two all-star analysts in our CAPS system?
First of all, both analysts base their views on their own market checks and interviews. We'll see who's in the right when both AMD and Intel report earnings next week, alongside the usual rush of third-party market research from Gartner, IDC, and others. We're currently at a three-month low in terms of fresh, investable information. Long-term investors would be well advised to wait for the hard data and then make decision based on that rather than unsupported rhetoric.
That said, the JMP downgrade comes across as a bit of a hatchet job. Objectively speaking, AMD's Fusion line gets its fair share of positive reviews from the hardware press. And it's not hard to find Fusion systems in your local big-box electronics store today. Gauna makes it seem like the product was stillborn, but it clearly isn't.
What to do now
Feeney's price target may be a bit too high -- I'm still leaning toward a fair price around $10 per share -- but she sees AMD aiming at a different market segment than Intel where it can compete today. Gauna missed that fact and apparently jumped to conclusions from there.
I'm hedging my bets by being long in both Intel and AMD these days, as both stocks offer tremendous value. A number of niggling problems continue to haunt the processor market as a whole and AMD in particular, but I think Mr. Market has overreacted to those issues. Gun to my head, I'd buy both stocks at these prices.
At the very least, you should keep a close eye on both AMD and Intel over the next couple of weeks as all the quarterly data pours in. To do that, add AMD and Intel to your Foolish wachlist, and then enjoy a steady stream of fresh news and Foolish analysis. When the time is right to act, you'll be the first to know.
Fool contributor Anders Bylund owns shares of Advanced Micro Devices and has sold puts in Intel, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Intel, and Qualcomm and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel and Microsoft, as well as creating diagonal call positions in Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.