ATI Shares Seen Outperforming Nvidia ATI Shares Seen Outperforming Nvidia In Near Term
Peter Kang,
ATI Technologies
Merrill Lynch upgraded shares of ATI Technologies to "buy" from "neutral" and said the recent launch of the R580 bolsters the graphics chipmaker's high-performance lineup just as shares of rival Nvidia appear to be losing steam.
"Overall, we believe that Nvidia's competitive momentum has peaked, and that ATI’s stock should outperform Nvidia's stock for the intermediate term," wrote analyst Sidney Ho in a client note issued today.
The analyst raised the fiscal 2006 earnings-per-share forecast on ATI (nasdaq: ATYT - news - people ) to 62 cents from 56 cents as it expects higher sales and profit margins.
"We see a much more robust product cycle coming with R580, with a corresponding potential boost for ATI's stock," the analyst said, adding that the market will welcome alternatives to the Nvidia (nasdaq: NVDA - news - people ) lineup.
ATI has "clearly benefited" from fourth-quarter chipset shortages for industry bellwether Intel (nasdaq: INTC - news - people ), the analyst said.
"However, we think Intel is determined to take matters into its own hands, given that some of Intel’s own problems have resulted from the chipset supply shortfalls," Ho said. The analyst said Intel clearly wants to fix its supply chain issue by summer before a showdown with Advanced Micro Devices (nyse: AMD - news - people ).
Ho has a $21 price target on the stock. "We think this is appropriate as ATI’s core desktop GPU [graphics processing unit] business continues to recover and move toward a normalized business environment."