October 26, 2023, $32.52
Business Overview:
Intel Corp. is a computer product and technology company known for designing, manufacturing, and selling computer, networking, data storage, and communication platforms. It is a leader in manufacturing microprocessors, which is the central unit of most computers. The company operates:
- Client Computing Group (CCG): This is typically the largest revenue generator for Intel and focuses on processors and platforms for laptops, desktops, and tablets.
- Data Center and AI (DCAI): Provides hardware and software solutions for data centers, which include powerful processors and chips that are optimized for enterprise-level tasks, cloud computing, and network infrastructure.
- Programmable Solutions Group (PSG): Specializes in field-programmable gate arrays (FPGAs), which are chips that can be programmed for specific tasks post-manufacturing.
- Network and Edge (NEX): Offers computing system solutions from fixed-function hardware to programmable hardware for cloud-native software.
- Accelerated Computing Systems and Graphics (AXG): Offers CPUs and GPUs for high-performance computing, gaming, and AI workloads.
- Mobileye: This recent acquisition focuses on developing driving assistance and self-driving solutions.
Maverick Guidance:
- P&F Double Bottom Breakdown Pattern on Oct 23, 2023
- Short-term technical buy/sell recommendation: ACCUMULATE ON WEAKNESS
- Long-term portfolio recommendation: CAUTIOUS BUY, bearing in mind the broad market is barely holding long-term technical support, and analysts differ widely in their expectations for the future of the company. However, the situation at Intel is not as bad as Wall Street is making it to be.
- We expect earnings are going to improve going forward:
- 3rd quarter earnings (Oct. 26 report) +$0.41 (Beat consensus forecast by +$0.20)
- 4th Quarter earnings are estimated to be $0.33 vs. $0.10 in the same quarter a year ago, so look for continuing improving operations.
Consideration for Maverick Portfolio:
- Intel (INTC) is appropriate for a risk profile score of 22-29. The Moderate Investor seeks to balance caution and ambition, aiming for reasonable growth while managing risk. The Maverick MODERATE GROWTH portfolio is designed to maintain a stable yet potentially rewarding financial strategy by including a mix of conservative and moderately aggressive Dow 30 stocks.
- Also appropriate for a risk profile score of 30-35. The Moderately Aggressive Investor is willing to take on higher risk for the potential of higher returns. The Maverick DYNAMIC GROWTH portfolio includes a higher allocation of high-growth-oriented Dow 30 stocks to align with this risk-tolerant approach.
Internal Strategic Factors
Strengths:
- Tech Innovation: History of pioneering tech with significant R&D investments.
- Strong Brand: Globally recognized for high-quality, high-performance products.
- Market Dominance: Over 75% market share in processors for pricing power.
- Diverse Portfolio: Beyond processors, it offers network controllers, memory, and graphics.
- Financial Strength: High revenue and profit margins support R&D, acquisitions, and shareholder rewards.
Weaknesses:
- PC Market Reliance: Heavy dependence on the declining PC market poses vulnerability to market shifts.
- Manufacturing Setbacks: Persistent delays and quality issues impacting timely product launches, allowing rivals to gain ground.
- Rising Competition: Intense rivalry between AMD and Nvidia with competitive alternatives in processors and graphics.
- Mobile Market Limitations: Limited success in entering the mobile market, hindering growth in this expanding segment.
- High R&D Costs: Substantial R&D investment, impacting profitability and posing challenges in price competition with lower-cost rivals.Top of Form
External Strategic Factors
Opportunities:
- New Market Expansion: AI, autonomous vehicles, and IoT offer promising revenue prospects.
- Technology Development: Investments in advanced manufacturing, 5G, and quantum computing for market disruption.
- Strategic Acquisitions: Utilizing financial strength for acquisitions and partnerships, like the recent Mobileye acquisition.
- Sustainability Focus: Developing eco-friendly products to appeal to environmentally conscious consumers.
- Emerging Market Entry: Diversifying revenue streams by expanding presence in growing emerging markets.
Threats:
- Rapid Tech Changes: Adapting to swiftly evolving market trends and tech preferences.
- Customer Dependency: Reliance on key customers like PC and server manufacturers affecting revenue.
- Geopolitical Risks: Exposure to trade disputes, sanctions, and political instability in various operating countries.
- IP Infringement: Vulnerability to intellectual property infringements, leading to legal battles and financial losses.
- Intense Competition: Struggle against aggressive competition from companies like AMD, Nvidia, and Qualcomm in technology development.
Market Guidance:
- Consensus Analyst Ratings— MarketBeat = Hold, TipRanks =Hold.
- 30 Wall Street analysts have offered 12-month price targets in the last 3 months. There are 6 Buy, 20 Hold, and 4 Sell. (from TipRanks)
- Based on 30 Wall Street analysts offering 12-month price targets in the last 3 months, the average price target is $37.31, with a high forecast of $56.00 and a low forecast of $17.00. The average price target represents a +15.3% change from the Oct. 26 close at $32.52. (from TipRanks)
- Dividend Yield: $0.13 per share paid quarterly to yield 3.01%.
- Dividend growth has been established only for 6 months and is dubious. (from TipRanks)
- Technical Sentiment (based on Technical Indicators and Moving Averages):
- com = Daily (NEUTRAL) and Weekly (SELL)
- TipRanks = Daily (SELL) and Weekly (STRONG SELL)
Value Line Guidance:
- Company Financial Strength Rating: A+
- Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
- Share Price Safety: 1 of 5
- Market Timing: 3 of 5
- Technical Rank: 3 of 5
- Beta: 70
- Stock’s Price Stability: 70/100
- Price Growth Persistence: 50/100
- Earnings Predictability: 45/100
- Average Annual PE: 12
- Average Annual Sales Growth in the past 5 years: +5.5%
- Average Annual Sales Growth for the next 5 years: ??
- Average Annual Cash Flow Growth in the past 5 years: +10.0%
- Average Annual Cash Flow Growth for the next 5 years: +1.0%
- Average Annual Earnings Growth in the past 5 years: +8.0%
- Average Annual Earnings Growth for the next 5 years: ??
- Average Annual Dividend Growth in the past 5 years: +6.0%
- Average Annual Dividend Growth next 5 years: +1.5%
- Average Annual Dividend Yield 3 to 5 years: +3.1% (wild guess)
Financial Performance
- 10-year Average Annual Total Return: +5.88% (through Oct 26, 2023) (Dow 30 4th quartile).
- Q3 earnings: +$0.41 (Beat by +$0.20)
- EPS: 2022: $1.85 2023: e$1.81 2024: e$1.30 (from Value Line Quarterly Report)
- Average Annual PE: 12 (VL Quarterly Report)
- PEG Ratio: ?? (FinViz)
- Dividend Growth Potential: ?? (VL)
- Beta: 0.90 (FinViz)
Quarterly Reports Summaries (including Revenue, Cash Flow, Earnings):
3Q2023 September
- Revenue of $14.2 billion, down 8% year over year (YoY).
- EPS attributable to Intel was $0.07; non-GAAP EPS attributable to Intel was $0.41.
- Fourth-quarter revenue guidance of $14.6 billion to $15.6 billion, with EPS attributable to Intel of $0.23 and non-GAAP EPS attributable to Intel of $0.44.
- Declared a quarterly dividend of $0.125 per share, payable on Dec. 1, 2023.
- Intel is on track to achieve five nodes in four years and regain leadership in transistor performance and power performance by 2025.
- Opened Fab 34 in Leixlip, Ireland, to establish a leading-edge semiconductor manufacturing value chain in Europe.
- Shared plans to install the world’s first high-NA EUV tool in Gordon Moore Park in Oregon.
- Submitted major manufacturing proposals worth over $100 billion to the U.S. Department of Commerce’s CHIPS Program Office in multiple states.
- Received a commitment from a major customer for Intel 18A and Intel 3, accelerating plans to build two new chip factories in Arizona.
- Outlined AI strategy at Intel Innovation 2023, focusing on making AI accessible across all workloads and hardware products through multi-architecture software solutions.
- Witnessed strong ramp of 4th Gen Intel Xeon Scalable processors, with 5th Gen Intel Xeon processors shipping to customers.
- Launched Intel Core Ultra processors and the new Intel Core 14th Generation desktop processor family, catering to improved performance for enthusiasts.
- Introduced the latest OpenVINO toolkit version 2023.1, enhancing AI inferencing and deployment runtime for client and edge platforms.
- Mobileye achieved record third-quarter revenue growth and secured design wins for advanced SuperVision and Chauffeur solutions with automakers FAW and Polestar.
2Q2023 June
- Intel’s stock has shown improvement recently after better-than-expected results in the June quarter and an optimistic outlook for the current period.
- The company posted earnings per share of $0.13, down from $0.29 in the previous year but better than anticipated.
- Revenues fell 15% to $12.9 billion, surpassing the target of $11.24 billion.
- Management credited the Client Computing and Data Center units for contributing to the positive performance.
- Intel’s outlook for the September quarter was robust, signaling a promising path for the company’s turnaround, although challenges may persist.
- The company faced inventory challenges due to a slowdown in demand for personal computers post-pandemic, but inventory levels have since improved, boding well for future earnings.
- Future sales and earnings estimates for the back half of this year and next are not as impressive as in previous years.
- Earnings per share are projected to reach $4.00 by the 2026-2028 period, contingent upon continued economic recovery and operational improvement.
- While the Intel turnaround story is promising, the current valuation does not offer a significant advantage, prompting investors to wait for clearer signs of sustained earnings recovery.
1Q2023 March
- Intel’s Q1 performance brought positive signals for investors after several disappointing quarters.
- Sales in the March quarter reached $11.7 billion, surpassing the estimated $11 billion, while the company lost $0.04 per share, better than the expected $0.15 deficit.
- Inventory levels improved in the personal computer sector, contributing to the company’s positive performance.
- The outlook for the Data Center Group has improved, suggesting the potential for profitability in the latter half of the year and promising prospects for 2024.
- Gross margins have been under pressure but are expected to improve in the remaining two quarters of the year.
- Despite the threat of a mild recession later in the year, the reopening of China and leaner inventory across distribution channels are positive factors.
- Earnings per share are anticipated to recover to around $4.00 by 2026-2028, showing improvement despite being lower than the pandemic-influenced record of $5.47 in 2021.
- The shares offer the potential for price recovery over the next 3 to 5 years, although caution is advised due to the possibility of economic downturns and potential challenges ahead.
4Q2022 December
- Intel faced challenges in 4Q2022, with sales and earnings well below 2021 figures.
- The company benefited during the pandemic from increased remote work, but Intel’s results declined as people returned to the office.
- Cost-cutting measures, including personnel reductions and focusing on domestic foundries, are expected to result in significant savings by 2025.
- Expected earnings for this year are $0.55 per share, significantly lower than 2022’s $1.85, with some recovery anticipated next year.
- The company’s recent dividend reduction and restructuring actions aim to preserve cash and support future growth.
- Although a recession is possible, economic conditions are expected to remain relatively stable, potentially benefiting Intel in 2024.
- Future earnings could rebound by 2026-2028, although uncertainties persist, indicating cautious optimism.
- Intel shares are currently untimely, offering favorable gains potential over the medium to long term, but caution is advised due to potential near-term price volatility.
Noteworthy Strategic Developments
- Intel recently announced its intent to separate its Programmable Solutions Group (PSG) operations into a standalone business. This will give PSG the autonomy and flexibility it needs to fully accelerate its growth and more effectively compete in the FPGA industry. The company may explore opportunities with private investors to accelerate the business’s growth, with Intel retaining a majority stake.
- In Q3, Intel also agreed to sell a 10% stake in its IMS Nanofabrication business (IMS) to TSMC, valuing IMS at approximately $4.3 billion.
The 3-to-5-year Operational and Financial Outlook:
- Over the next two to three years, Intel intends to conduct an IPO for its Programmable Solutions Group (PSG), which clouds an already doubtful outlook.
- The 3-to-5-year outlook for revenue and earnings is hard to forecast.
FinViz Snapshot: https://finviz.com/screener.ashx?v=341&t=INTC
10-Year Historical Price Chart
https://tvc-invdn-com.investing.com/data/tvc_0af7f3a750c89cff4e8f0dd695ceb054.png
Point & Figure Chart: (from StockCharts.com)
https://stockcharts.com/freecharts/pnf.php?c=INTC,PWTAWANRNO[PA][D][F1!3!!!2!20]
