With AMD Reeling, Intel Shares Look Attractive

Since I already shared my thoughts on Advanced Micro Devices (AMD), it seems logical to take a look at Intel (INTC) as well. I was pretty neutral on this stock but after thinking about it some more, I think large cap investors might see some things they like in INTC shares.

For large cap growth investors who are looking for nice combination of dividends and decent upside price appreciation potential, Intel stock might be worth a close look.

If the company really is able to take it to AMD during 2007 and regain lost market share, There seems to be upside to the stock. Current 2007 estimates are around $1.10 per share, so investors are dealing with a 19x P/E ratio and a dividend yield of more than 2%. Profits are expected to jump more than 20% in 2008, to $1.35 per share.

Obviously the microprocessor landscape shifts quickly, and predicting margins right now for calendar 2007, let alone 2008, is tricky. That said, if we assume current projections for Intel will likely prove inaccurate, would you feel better taking the “over” or the “under” relative to today’s expectations?

I would think the odds are better than Intel can beat these numbers, given that AMD is on the ropes and Intel is closing the gap technology-wise. Intel was lagging behind for a long time, but now they seem to have turned the corner. As you can see from the chart below, the stock has done nothing for a year.

Full Disclosure: Long INTC Jan ’09 $10 LEAPs