Intel Corporation (INTC) in Santa Clara, Calif., designs, manufactures, and sells essential technologies for cloud, innovative, and connected devices. Its segments include its Data Center Group; Internet of Things Group; Mobileye; and Non-Volatile Memory Solutions Group. In comparison, Advanced Micro Devices, Inc (AMD), which is also headquartered in Santa Clara, operates in two segments: Computing and Graphics; and Enterprise, Embedded, and Semi-Custom. Its products include x86 microprocessors, an accelerated processing unit, chipsets, discrete and integrated graphics processing units, data center and professional GPUs, and development services.

Semiconductor chips play a vital role in advanced technologies that are helping several companies dodge the healthcare crisis. Because hybrid working arrangements and decarbonization are expected to continue even in the post-pandemic environment, the demand for semiconductors is expected to remain high. While supply constraints impacted the industry, robust demand has allowed companies to raise prices for their chips and generate substantial profits. Furthermore, continuing advancements in artificial intelligence (AI), Internet of Things (IoT), and 5G connectivity are expected to keep driving demand in the semiconductor sector. According to a Fortune Business Insights report, the global semiconductor market is projected to grow at an 8.6% CAGR by 2028. Therefore, both INTC and AMD should benefit.

INTC has gained 5.9% in price over the past month, while AMD has negative returns. However, AMD’s 31.4% gains over the past three months are significantly higher than INTC’s 0.1% returns. Moreover, AMD is the clear winner with 50.8% price gains versus INTC’s 5.7% returns in terms of the past year’s performance.

Click here to checkout our Semiconductor Industry Report for 2022

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On Oct.27, 2021, Intel unveiled the 12th Gen Intel Core processor family by launching six new unlocked desktop processors, including the world’s best gaming processor, the 12th Gen Intel Core i9-12900K. The launch could lead to increased sales for the company.

On Nov.4, 2021, AMD reported its continued momentum and collaboration with Microsoft Azure, offering the 3rd Gen AMD EPYC processor in the latest generation of Dasv5 and Easv5 Azure Virtual Machines.

Recent Financial Results

For its fiscal third quarter, ended Sept.25, 2021, INTC’s non-GAAP revenue increased 5% year-over-year to $18.10 billion. The company’s non-GAAP net income came in at $7 billion, representing a 54% year-over-year increase. Also, its non-GAAP EPS was  $1.71, up 59% year-over-year.

AMD’s revenues increased 54% year-over-year to $4.31 billion for its fiscal third quarter, ended Sept. 25, 2021. The company’s non-GAAP net income came in at $893 million, representing a 78% year-over-year increase. And its non-GAAP EPS was $0.73, up 78% year-over-year.

Past and Expected Financial Performance

INTC’s revenue and EPS have grown at CAGRs of 4.3% and 17.3%, respectively, over the past three years. Analysts expect INTC’s revenue to decrease 1.3% for the quarter ending March 31, 2022, and 0.3% in fiscal 2022. The company’s EPS is expected to decline 38.1% for the quarter ending March 31, 2022, and 29.9% in fiscal 2022. However, its EPS is expected to grow at a 3.2% rate per annum over the next five years.

In comparison, AMD’s revenue and EPS have grown at CAGRs of 32.4% and 129.6%, respectively, over the past three years. The company’s revenue is expected to increase 25.1% for the quarter ending March 31, 2022, and 19% in fiscal 2022. Its EPS is expected to grow 32.7% for the quarter ending March 31, 2022, and 27% in fiscal 2022. Also, AMD’s EPS is expected to grow at a 35.3% rate per annum over the next five years.

Profitability

INTC’s trailing-12-month revenue is 5.28 times AMD’s. INTC is also more profitable, with gross profit and EBITDA margins of 56.27% and 44.25%, respectively, compared to AMD’s 46.82% and 23.05%.

However, AMD’s 72.14%, 20.93%, and 30.98% respective ROE, ROA, and ROTC are higher than INTC’s 25.63%, 9.18%, and 11.90%.

Valuation

In terms of forward non-GAAP P/E, AMD is currently trading at 51.55x, which is 404.4% higher than INTC’s 10.22x. Furthermore, AMD’s 38.21x forward EV/EBITDA ratio is 463.6% higher than INTC’s 6.78x.

So, INTC is relatively affordable here.

POWR Ratings

INTC has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. In comparison,  AMD has an overall C rating, which translates to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

INTC has an A grade for Value, which is consistent with its 10.22x forward non-GAAP P/E, which is 58.1% lower than the 24.38z industry average. However, AMD has a C grade for Value, which is in sync with its 51.55x forward non-GAAP P/E, which is 111.4% higher than the 24.38x industry average.

Of the 99 stocks in the A-rated Semiconductor & Wireless Chip industry, INTC is ranked #8. In contrast, AMD is ranked #83.

Beyond what I have stated above, we have also rated the stocks for Sentiment, Momentum, Quality, Growth, and Stability. Click here to view all the INTC ratings. Also, get all the AMD ratings here.

The Winner

The semiconductor industry is expected to continue growing rapidly with increasing government and private investments. And while both INTC and AMD are expected to benefit, we think INTC is a better investment now because of its lower valuation and higher profit margin.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Semiconductor & Wireless Chip industry here.

Click here to checkout our Semiconductor Industry Report for 2022

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