Analyst Swaps Ratings On Intel, Advanced Micro Devices Stocks

Goldman Sachs thinks AMD now has an advantage over Intel

by Patrick Martin

Published on Aug 10, 2018 at 10:15 AM

This morning an analyst at Goldman Sachs flip-flopped their stance on two rival chip stocks. Advanced Micro Devices, Inc. (NASDAQ:AMD) was upgraded to "neutral" from "sell" and saw its price target bumped up to $21 from $13.25, while sector peer Intel Corporation (NASDAQ:INTC) was downgraded to "sell" from "neutral" and received a price-target cut to $44 from $49. The analyst in coverage believes the delay in manufacturing for Intel's new processors gives AMD an advantage, and that the blue chip's margins could come under pressure.

AMD Squeezing Shorts Amid Hot Streak

Looking at AMD, the chip name is up 0.2% to trade at $19.13, just below its late-July multi-year high of $20.18. The shares boast an 86% lead in 2018, with pullbacks in June and July contained by their 40-day moving average. 

Many analysts still remain skeptical, though. Exactly half of the 20 brokerages covering AMD rate it a "hold" or "strong sell," and its consensus 12-month price target of $18.28 sits below Thursday's closing perch. 

short squeeze could be playing out in response to the equity's torrid pace. Short interest fell by 6.1% in the two most recent reporting periods, yet the 161.54 million shares sold short represent 19.5% of AMD's total available float -- and nearly four day's worth of pent-up buying power, at the stock's average daily volume.

Traders looking to take advantage of the equity's surge may want to do so with near-term options, which are attractively priced at the moment. AMD stock currently sports a Schaeffer's Volatility Index (SVI) of 45%, which ranks in the 19th percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.

Puts Popular As INTC Stock Pulls Back

At last check, Intel stock was down 2.8% to trade at $48.76. INTC shares raced to an 18-year high of $57.59 on June 4, but since then have shed 18%. The news today takes the stock back below its 200-day moving average, a trendline INTC breached in late July after spending over 11 months trading above it. Overall, though, the security boasts a 37% gain year-over-year. 

In the options pits, puts have become more popular lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows INTC with a 10-day put/call volume ratio of 0.48, which ranks in the elevated 89th percentile of its annual range. This shows that although calls outweigh puts on an absolute basis, the lofty percentile rank means puts have been purchased over calls at a faster-than-usual clip during the past two weeks.

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