Please ensure Javascript is enabled for purposes of website accessibility

Why AMD Stock Popped After Intel's Earnings Beat

By Rich Smith - Apr 23, 2021 at 11:24AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's a hint: It's not because Intel reported great news.

What happened

Shares of rising Intel (INTC 0.30%) rival and fellow semiconductors giant Advanced Micro Devices (AMD -1.07%) popped in early trading on the Nasdaq Friday, the first day after Intel's disappointing Q1 2021 earnings report. AMD's shares were up 4.14% as of 11:10 a.m. EDT.

So what

Intel, if you haven't heard, actually beat on its Q1 earnings. Despite sales declining 1% year over year, the company managed to report a pro forma profit of $1.39 per share, which was ahead of analyst expectations.

Regardless, Intel reported a steep 540 basis point decline in its gross margin to 55.2%, and it saw its operating margin cut nearly in half as the company spent heavily to race to catch up to its rivals in advanced computer chips. Analysts at Citigroup commented yesterday that Intel stock appears to be close to its peak valuation and is likely to decline as investors acclimate to the new environment in which Intel is losing, not gaining, market share.

And the reason this is good news for AMD is that, according to Citi at least, it's AMD that's taking that market share away from Intel.  

Closeup of up-and-down stock market returns

Image source: Getty Images.

Now what

So what's an investor to do with all this information?

At a valuation of just 13.6 times trailing earnings, Intel stock certainly looks like a relative bargain when compared with AMD stock, which trades at 38.4 times earnings. But AMD has a cash-rich balance sheet, versus Intel that's carrying $13.5 billion in net debt. And analysts see Intel's earnings growing only 10% annually over the next five years, while AMD is pegged for 29.5% annualized earnings growth, according to S&P Global Market Intelligence data.

Intel may look like a value stock right now, but it's AMD that's got all the momentum.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
$74.40 (-1.07%) $0.80
Intel Corporation Stock Quote
Intel Corporation
$36.80 (0.30%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.