Intel Corporation (INTC - Get Rating) is a popular tech company that designs, manufactures, and sells computer products and technologies globally. The company operates through the segments of CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other.

Recently, it was reported that INTC would manufacture semiconductors for Taiwanese smartphone processor supplier MediaTek. The companies said that INTC’s Intel Foundry Services would manufacture multiple chips for MediaTek to be used in a range of smart devices. MediaTek’s addition to the INTC customer list is expected to boost the company’s performance.

Over the past year, INTC’s stock has declined 31.2%. It is down 28.2% year-to-date. However, the stock has gained 1.7% over the past month and 1.8% intraday to close its last trading session at $36.96.

Here are the factors that could affect INTC’s performance in the near term:

Bleak Bottom Line

For the fiscal second quarter ended July 2, INTC’s non-GAAP net revenue decreased 17.3% year-over-year to $15.32 billion. Non-GAAP net income declined 78.8% from the prior-year quarter to $1.18 billion, while non-GAAP EPS came in at $0.29, down 78.7% from the same period the prior year.

Wide Profit Margins

INTC’s trailing-12-month EBITDA margin and net income margin of 34.52% and 26.03% are 167.1% and 491.4% higher than their respective industry averages of 12.92% and 4.40%.

The stock’s trailing-12-month ROE, ROTC, and ROA of 20.50%, 6.22%, and 11.21% are 181.4%, 50.1%, and 297.4% higher than their respective industry averages of 7.28%, 4.14%, and 2.82%

Cheap Valuations

In terms of its forward P/E, INTC is trading at 14.02x, 37.5% lower than the industry average of 22.44x. The stock’s forward EV/EBITDA multiple of 7.18 is 44.4% lower than the industry average of 12.92. In terms of its forward Price/Book, it is trading at 1.45x, 65% lower than the industry average of 4.15x.

Analysts Expect Bottom-line Downsides

The consensus EPS estimates of $0.86 and $0.95 for the respective quarters ending September and December 2022 indicate 49.7% and 12.8% year-over-year decreases. Street EPS estimate for the fiscal year 2022 of $3.42 reflects a decline of 37.5% from the prior year.

POWR Ratings Reflect Uncertainty

INTC has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

INTC has a Value grade of B in sync with its discounted valuations. However, the stock has an F grade for Growth, consistent with its bleak financial performance in the last reported quarter.

In the 94-stock Semiconductor & Wireless Chip industry, it is ranked #54. The industry is rated B.

Click here to see the additional POWR Ratings for INTC (Momentum, Stability, Sentiment, and Quality).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

Although the MediaTek partnership is expected to boost INTC’s foundry operations, its bleak bottom line in the last reported quarter is quite concerning. Moreover, the stock is trading below its 50-day and 200-day Moving Averages, signaling a downtrend. Hence, I think it might be wise to wait for a better entry point in the stock.

How Does Intel Corporation (INTC) Stack Up Against its Peers?

While INTC has an overall POWR Rating of C, one might consider looking at its industry peers, STMicroelectronics N.V. (STM - Get Rating) and United Microelectronics Corporation (UMC - Get Rating), which have an overall A (Strong Buy) rating, and MaxLinear, Inc. (MXL - Get Rating) and Axcelis Technologies, Inc. (ACLS - Get Rating), which have an overall B (Buy) rating.

INTC shares were trading at $36.46 per share on Tuesday afternoon, down $0.50 (-1.35%). Year-to-date, INTC has declined -28.10%, versus a -12.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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