The Ignorant Investor
Ignorance Can't Stand in the Way of My OpinionFriday, February 17, 2006
The Mad Divergence of AMD and Intel
I know that Intel is losing market share to AMD, but the difference in stock prices between the two has grown ridonculous. Intel is trading at 14+ times earnings of $1.40 per share. AMD is trading at over 107 times earnings of $0.38. How does the market justify such a wide divergence for two companies in the same industry?
Sounds like somebody is heading for a crash. And I'm not just saying that because I own Intel. I can accept Intel at 14X earnings. But AMD's $40 share price assumes that AMD's management is going to be hitting balls out of the park not just this year, but for years into the future. It's going to have to take a tremendous amount of market share away from Intel. An amazing accomplishment if it happens.
Sounds like somebody is heading for a crash. And I'm not just saying that because I own Intel. I can accept Intel at 14X earnings. But AMD's $40 share price assumes that AMD's management is going to be hitting balls out of the park not just this year, but for years into the future. It's going to have to take a tremendous amount of market share away from Intel. An amazing accomplishment if it happens.
posted by Worker 17 # 4:02 PM 
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Cool. I've been wanting to sell my Intel stock for a while, but I missed the last run up and the beating Wall Street doled out on the stock recently has taken me by surprise. They've got money in the bank, solid earnings, good engineers, a solid brand, but Wall Street is pissed anyway. Okay, I get it. It's no longer a growth company. But 14x earnings when the S&P 500 p/e is running around 16-17? C'mon, says I. Though there aren't any sure things in investing, it's a halfway decent bet that it rises just to match 16x earnings.
So even if I sell the stock and take the loss now, where am I going to find a better bargain, you know? So I'll hold for now.
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So even if I sell the stock and take the loss now, where am I going to find a better bargain, you know? So I'll hold for now.
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