Chip Glut Leaves Intel a Little Too Cheap

The chip sector has been getting destroyed … and for good reason. The U.S., putting the clamps down on who can sell what equipment to what country, is seriously hurting companies’ revenue.

Inventories of chips have gone from nowhere to be found to a glut. But at this point, things might have gone too far in the chip sector. Intel (INTC)  is now valued at less than two-times its revenue. The price-to-earnings ratio on INTC is down to about six.

Yes, earnings might fall some, but that would put EPS at what … $10? Even in this market that I think could still move lower, I see areas where things are oversold. Intel appears as one of those names. The January $32.50 calls in INTC cost less than $2.00; this stock was over $35 bucks just three weeks ago. Shares now are too cheap.

Trade: Buy to open INTC Jan. 20 $32.50 calls for $1.90.