Semiconductors were some of the hardest-hit equities this year and investors are surely wondering if these stocks will rebound in 2023. Among chip stocks, Advanced Micro Devices
AMD
and Intel
INTC
are names that will draw interest.
The two companies have battled for market share in the industry becoming somewhat fierce competitors. AMD had momentarily and monumentally passed Intel in terms of market cap earlier in the year.
Let’s see which stock may be geared to have a stronger performance going forward.
Performance
Before we dive into growth prospects and value let’s take a look at the recent and historical performance of AMD and Intel stock.
Intel is down -45% year to date to slightly outperform AMD’s -52% but both have noticeably lagged the S&P 500’s -17% and the Nasdaq’s -28%. Over the last decade, AMD’s total return is an astonishing +2,559% to crush INTC and the broader indexes.
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AMD’s total return is the same as its direct price performance as the company doesn’t offer a dividend at the moment. This makes AMD’s decade performance all the more impressive as Intel’s price performance is only +36% in the last 10 years without its dividend.
The decade chart is symbolic of AMD taking market share from INTC, but past performance doesn’t always guarantee future success which has ironically been true with these two stocks.
Valuation & Growth
Trading around $67 per share and roughly 56% from its 52-week high, AMD has a P/E of 20.5X. In comparison, INTC trades 49% off its highs at $28 a share and 14.7X earnings.
From a valuation standpoint, both stocks are starting to look attractive relative to their past. However, Advanced Micro Devices stands out here too. AMD trades well below its absurd decade high of 5,985X and at a 49% discount from its median of 47.9X. When comparing this period, INTC trades nicely beneath its decade high of 16.7X but 15% above its decade median of 12.8X.
Pivoting to growth, AMD’s earnings are now expected to jump 25% to $3.49 a share in 2022. Fiscal 2023 EPS is projected to rise 1% to $3.52. However, earnings estimate revisions have declined for both FY22 and FY23 over the last 90 days.
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Sales are projected to pop 43% this year and rise another 4% in FY23 to $24.59 billion. FY23 sales would represent a stellar 265% increase from pre-pandemic levels with 2019 sales at $6.73 billion.
Turning to Intel, earnings are forecasted to decline -64% this year to $1.97 per share. Fiscal 2023 earnings are projected to drop another -3% as the company looks to stop the bleeding from several lackluster quarters earlier in the year. Earnings estimates for FY22 and FY23 have also declined for Intel as well.
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On its top line, Intel’s sales are now projected to fall -18% this year and another -3% in FY23 to $61.66 billion. This is also a -14% decrease from 2019 pre-pandemic sales. However, Intel’s stock appears to have mostly priced in its dismal outlook and is at its cheapest levels in years in terms of stock price.
Dividends
Intel’s dividend didn’t make much of a difference in the total return decade chart comparison with AMD but in the current market environment, it is certainly more helpful. This is an obvious edge to Intel as AMD does not offer a dividend to compete with INTC’’s solid 5.08% annual dividend yield.
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Bottom Line
Advanced Micro Devices (AMD) and Intel (INTC) stock both land a Zacks Rank #3 (Hold). From a performance and valuation perspective, AMD appears to still have an edge over its competitor. The same can be said for AMD’s growth prospects, although in the near term, operating conditions will be tougher for most companies.
To that note, Intel does have the advantage of rewarding patient investors with its generous dividend. Both stocks are starting to look attractive at their current levels and holding shares could start to pay off next year. The possibility of a 2023 rebound could largely depend on their fourth-quarter earnings reports and the ability to offer better-than-expected guidance.
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