UPDATE 1-Friedman reinitiates Intel and AMD with market perform
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June 5 (Reuters) - Friedman Billings Ramsey reinitiated coverage of chipmakers Intel Corp (INTC.O) and Advanced Micro Devices Inc (AMD.N) with a "market perform" rating, and a set a price target of $27 on Intel and $8 on AMD.
"We think Intel will appreciate over the next year but less than most peers, given its slower growth prospects, limited additional cost-reduction opportunities, and a stock price still near its prior-cycle high," the brokerage said in a note to clients.
The law of large numbers suggests Intel will find it increasingly difficult to continue to grow revenues at a rate meaningfully above inflation, the brokerage said.
"For AMD, new product and process launches are encouraging, but we remain concerned about the firm's cash position and burn rate, its current competitive position, and its still-premium valuation relative to other money-losing chip firms," the brokerage said.
Friedman Billings Ramsey also raised concerns about AMD's future capital needs and its three-quarter lag behind Intel in ramping the latest technology.
AMD and Intel dominate the PC microprocessor market. Intel's revenue was six times that of AMD in 2007 and its market capitalization is more than 30 times AMD's.
"Business trends are improving, global demand is better than feared, inventories remain normal, investor expectations remain somewhat muted, and chip stock valuation multiples remain attractive," the brokerage said, commenting on the overall semiconductor sector.
Shares of Intel were trading up more than 1 percent at $23.79 Thursday afternoon on Nasdaq.
AMD's stock was trading up almost 7 percent at $7.69 on the New York Stock Exchange. (Reporting by Eric Yep in Bangalore; Editing by Pratish Narayanan)
