Traders loved chip companies during the last bull market. In the current bear market? Not so much. Slowing PC sales, a declining economy, and supply chain issues have created a mess for the space.
However, the space may have gone from being overly optimistic last year to overly pessimistic today. That suggests with all the downgrades and fear in the space that it may be time for contrarian investors to buy.
A few analysts likewise see values now that shares are so far off of last year’s highs. Of the opportunities today, it may be prudent to stick with the best players in the space today.
One of those is Advanced Micro Devices (AMD). Shares are down 44 percent in the past year, but the past 4 quarters have seen a 70 percent jump in revenues. And the company is pursuing a mix of chips that are well poised beyond the current market fears.
Shares have gone from 44 times earnings last year to under 14 times forward earnings today. That’s inexpensive enough to make for a decent value and long-term entry point for investors today.
Action to take: This industry leader is worth buying at current prices, and even lower if markets continue that way in the coming weeks. At present, shares don’t pay a dividend.
For traders, the March 2023 $75 calls, last going for about $3.50, offer mid-double-digit returns on a turnaround in shares in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.