The Oxen Report: A Lucrative Week Play in the Semiconductor Line

It is the start of Q1 2010 earnings reporting season. Things kick off this afternoon with Alcoa Inc. (AA) and will continue throughout the week with big names in the financial and semiconductor industry. This earnings season has mixed reviews as do most, but with a lot of underestimation the past couple quarters, I do worry about overestimation this quarter. One sector that should get off to a strong start will be the semiconductor industry. Intel, Fairchild Semi, and Advanced Micro Devices all report this week, which brings me to my Play of the Week.

Play of the Week: Advanced Micro Devices Inc. (AMD)

Analysis: The shadow that Intel Corp. (INTC) is a large and overbearing one for sure. It is very seldom that AMD can gain market share on the Intel giant. Yet, in the short term, such as this week, the stock may actually be the beneficiary of the buzz that Intel may create. There are a lot of reasons to believe that AMD could make a splash this week, and it starts with Intel. Tomorrow evening, INTC reports their quarterly earnings and should create buzz throughout the day. Additionally, it is rare that Intel does anything but outperform. The company quarter after quarter does what is necessary to report above estimated earnings. That sort of consistency is something I am willing to bet on to happen again this quarter, and if it does, it will mean a nice gain for AMD as well.

Most analysts are getting behind these two giants because of the increase in demand for personal computers and servers that was seen throughout the first three months of 2010.

BMO Capital Analyst Ambrish Srivastava comments, “Our checks suggest that demand remains strong, partly driven by strength in notebooks.” He continues to comment that “Intel is likely facing some difficulty in satisfying demand (on servers), and could be ceding some share near term.”

That demand is being filled by AMD. The company recently rolled out new server chips that are cutting into Intel’s market share, which is positive for AMD and should continue to give the stock a boost. The company additionally has some cash flow to work with after they sold off GlobalFoundrries. Many analysts believe AMD is turning a corner and bringing more consistency to their name. These are all good things.