Merrill Lynch chip analyst Srini Pajjuri this morning cut his rating on Advanced Micro Devices (AMD) to Underperform from Neutral, while moving Analog Devices (ADI) in the other direction, to Neutral from Underperform.

Pajjuri notes that ADI is down nearly 30 percent since early June; he says the valuation now “mostly reflects our margin and growth concerns.” He notes that the stock trades at 12 times EV/FCF, a discount to other analog chip stocks. He points out that ADI boasts strong free cash flow and a three percent dividend yield, and that ADI has limited exposure to consumer and PC markets

As for AMD, Pajjuri says the change followed a review of his ratings following the call on ADI. “Although we have not changed our fundamental outlook for AMD, we believe it is relatively less attractive than other Neutral rated stocks in its cluster,” he writes.

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