AMD, the closest peer for Intel, is unprofitable on a trailing basis and net losses are expected next year as well. With revenue down 25% last quarter versus a year earlier, it’s not surprising that the market has driven the stock price down 54%. We definitely don’t think that AMD is a buy; anyone who expects the industry to recover is better off buying Intel.
Texas Instruments Incorporated (NASDAQ:TXN), STMicroelectronics N.V. (NYSE:STM), and Maxim Integrated Products Inc. (NASDAQ:MXIM) are three additional comparable companies. STMicroelectronics is also looking at finishing 2012 in the red, and the stock trades at 31 times forward earnings estimates. It also pays a high dividend yield, but revenue is down and we don’t think that it’s a safe enough stock for an income investor. Texas Instruments and Maxim have trailing P/E multiples in the 20-24 range; this is, of course, a sizable premium to Intel though revenue was only down 2% at each of these companies compared to the third quarter of 2011. Texas Instruments actually had its net income come in higher. The sell-side expects earnings growth at these companies in 2013. We’d be skeptical that these peers can do that much better than Intel, and their multiples are high, so it may be best to avoid these stocks as well.
We’re not confident enough in the industry to buy Intel right now, but it could be worth watching for future developments. Its P/E multiples are low enough that it could be a good value if it holds its earnings steady, and the stock certainly should be revisited after its next quarterly report.