Its Time To Call Bull On AMD
This is something I've been tracking for the last little bit and I think it's finally time to pull the trigger. The basic idea behind this trade is that AMD stock is massively overvalued in terms of INTC stock, and the valuations just don't make sense anymore.
Here's the bottom line
Intel earns $23.3 billion in net income on $79 Billion in Revenue. This is valued at $200 billion by the market
AMD earns $609 million in net income on $7.6 Billion in Revenue. This is valued at $100 billion by the market.
Each share of Intel is priced at $49 and earns $5.50.
Each share of AMD is priced at $83 and earns 53 cents.
The two companies are priced as if Intel is about to go out of business and AMD is going to scoop up most of the company's market share.
1.) This won't happen - Intel has a larger portfolio of growth vectors
2.) Intel is only 6 or so months behind intel, hardly a commanding lead especially given that AMD was able to come back into relevance with less resources.
3.) Intel pays a dividend and AMD doesn't
4.) Intel just launched a huge share buyback
5.) This price discrepancy only exists because of a 7nm announcement by intel, something which the market has reacted to emotionally, not logically, thus presenting an opportunity
6.) Trading it as a pair removes all market risk
This is one of the most obvious trades I've seen in a long time & I think the technicals present an opportunity here with the MDD showing slowing deviation from average pricing, despite the extremely extended nature of the move.
The time is now.
Long INTC
Short AMD
Here's the bottom line
Intel earns $23.3 billion in net income on $79 Billion in Revenue. This is valued at $200 billion by the market
AMD earns $609 million in net income on $7.6 Billion in Revenue. This is valued at $100 billion by the market.
Each share of Intel is priced at $49 and earns $5.50.
Each share of AMD is priced at $83 and earns 53 cents.
The two companies are priced as if Intel is about to go out of business and AMD is going to scoop up most of the company's market share.
1.) This won't happen - Intel has a larger portfolio of growth vectors
2.) Intel is only 6 or so months behind intel, hardly a commanding lead especially given that AMD was able to come back into relevance with less resources.
3.) Intel pays a dividend and AMD doesn't
4.) Intel just launched a huge share buyback
5.) This price discrepancy only exists because of a 7nm announcement by intel, something which the market has reacted to emotionally, not logically, thus presenting an opportunity
6.) Trading it as a pair removes all market risk
This is one of the most obvious trades I've seen in a long time & I think the technicals present an opportunity here with the MDD showing slowing deviation from average pricing, despite the extremely extended nature of the move.
The time is now.
Long INTC
Short AMD
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