Intel Vs. AMD: Which Is The Better Buy?

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 |  Includes: AMD, INTC
by: Karin Hernandez

The global economic downturn and the weak sales results in the consumer PC market have not been kind to chipmakers, but some are doing better than others. Intel (NASDAQ:INTC), while struggling, is not quite in as dire straits as its competitor, Advanced Micro Devices (NASDAQ:AMD). Intel and AMD will both be reporting 2nd quarter earnings next week (July 16-21).

In my analysis, I tend to rely heavily on analyst opinion and estimates. I figure they have been studying the stock for awhile and probably have a better handle on the numbers than I do. I do look at current news, as well, but I like to lean more on the numbers to provide an objective recommendation.

Intel is currently trading at about $25, right in the middle of its 52-week range. It has a PE of 10.9 and pays a 3.2% dividend. The current analyst rating is a 2.4 (1.0 = Strong Buy, 5.0 = Sell) with a mean target price of $29.41.

The fiscal-year 2012 consensus earnings estimate is $2.47, which is 3% greater than actual 2011 earnings of $2.39. The estimate for fiscal-year 2013 is $2.67, 8% higher than 2012.

The stock is up 7% year-to-date, and up 15% from this time last year. The current estimated annual growth rate for the next 5 years is 12.16%, compared to an industry average of 15.07% and a sector average of 17.76%.

AMD is trading at approximately $5 per share, up 16% from its 52-week low of $4.31. It has a PE of 9.2 and pays no dividend. Currently analysts rate it a 2.5 with a mean target price of $6.88. AMD's fiscal-year 2012 consensus earnings estimate is $0.53, 6% higher than actual 2011 earnings. Its estimate for fiscal-year 2013 is $0.69, 30% higher than 2012.

The stock is down 8% since the beginning of 2012, and down 30% from a year ago. Current 5-year annual growth is estimated at 9.75% vs the S&P at 10.70%. AMD just warned last week that its 2nd quarter earnings numbers would be far worse than initial guidance had indicated, and the stock was punished accordingly. So where might it go from here?

Eventually, I go back to the numbers. With Intel's current PE and year-end 2013 earnings estimate, I see a stock price of $29, or upside of 16%. AMD's PE and earnings estimate leads to a stock price of $6.35, 27% upside.

Analysts offer a mean target price of $29 for Intel and $7 for AMD. With its recent earnings warning, and its terrible history of creating (more like destroying) shareholder value, I could not recommend buying AMD. Intel looks like a decent buy at this level.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.