Canaccord Genuity on AMD, FedEx, and Lululemon

By Canaccord Genuity  SEP 19, 2012 12:40 PM

AMD leads tech names lower, FedEx cuts full-year guidance, and shares of Lululemon tumble on rumors that David Einhorn took a short position in the yoga retailer.

 


The following are excerpts from Canaccord Genuity analysts' commentaries.

Advanced Micro Devices (AMD): Respectfully disagree...

Advanced Micro Devices led tech names lower after the world's second-largest chipmaker fell the most in two months after the company announced that its CFO Thomas Seifert is leaving to seek other opportunities. AMD said the resignation had nothing to do with any internal problem, but rather Seifert's desire “to pursue other opportunities.” Devinder Kumar, AMD’s corporate controller, has been named interim CFO while the company conducts a search for a replacement.

Bloomberg noted that Seifert’s resignation, effective September 28, is the latest disruption at the semiconductor maker, which is struggling to prevent larger rival Intel (INTC) from taking market share and is facing slowing demand in the PC market. Analysts said Seifert, who was portrayed as a respected executive, was leaving at a critical time for AMD. “The company is in the middle of trying to recover from some serious self-inflicted execution issues, at the margin this will be one more distraction that they don’t need right now, and will give nervous investors one more perceived reason to avoid the name,” an analyst at Bernstein Research stated.

FedEx (FDX): Rough road ahead.

FedEx traded lower Tuesday after cutting its full year guidance due to weaker global trade flows and a shift by customers towards cheaper shipping options. Management cut its full year earnings forecast to a range of $6.20-6.60 per share, down from the $6.90-7.40 it estimated in June. Consensus currently sits at $7.03. CEO Fred Smith said, “Exports and trade have gone down at a faster rate than global trade has” noting that new tech product launches won’t be enough to offset broader weakness in manufacturing. CFO Alan Graf said the company saw “a shift by our customers to our (non-premium) services and outpaced our ability to reduce FedEx Express operating costs to match demand levels.”

The reduced guidance comes two weeks after the company cut its earnings estimates for the first quarter, with management calling for earnings to be $1.37-1.43 per share. First quarter earnings of $1.45 managed to top that number, while revenue grew to 2.6% to $10.79 billion, ahead of the consensus estimate of $10.7 billion.

Lululemon Athletica (LULU): No yoga pants for Einhorn?

Shares of Lululemon Athletica tumbled on chatter that hedge fund manager David Einhorn had taken a short position in the yoga retailer. It has not been confirmed that Einhorn is short shares of Lululemon, and we are not likely to hear anything until October 2, when he speaks at the eighth annual Value Investing Congress. The rumors come the same day the Wall Street Journal published an article about the effects of being "Einhorned."

The article reviewed the performance of 22 stocks after they were mentioned by Einhorn in television interviews, investor conferences, there public events and letters to Greenlight investors. The nine companies where analysts and investors saw his comments as negative fell by a median of 4.9% on the same day. Within the month, the median decline was 13%. Companies included in the study included St. Joe (JOE), Green Mountain Coffee Roasters (GMCR) and Martin Marietta (MLM).

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