Intel Corp. (INTC) designs integrated digital technology platforms for smart and connected devices worldwide. By embedding intelligence in the cloud, network, and edge, INTC unleashes the potential of data to transform business. It operates through PC Client Group, Data Center Group, Internet of Things Group, Mobile and Communications Group, Software and Services, and All Other segments.
INTC is one of the best “next chip generation” stocks with record revenue and income growth. In the second quarter ended June 2020, revenue increased 20% year-over-year to $19.7 billion as revenue from processors for data centers soared 43% to $7.1 billion in the quarter. Revenue from PC chips climbed 7% to $9.5 billion. Among INTC’s smaller businesses, memory chip sales jumped 76% year-over-year to $1.7 billion. EPS for the quarter came in at $1.19, growing 29% compared to the year-ago quarter.
Despite the robust growth in its global business model, the stock lost 7.4% year-to-date due to shifting sands of the semiconductor sector and INTC’s manufacturing issues. Because of the manufacturing issues and a number of other factors, INTC has a “Neutral” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates INTC:
Trade Grade: C
INTC is currently trading higher than its 50-day moving average of $50.44 but below its 200-day moving average of $56.68, indicating that the stock is neither in an uptrend nor in a downtrend. However, the stock’s 10.2% loss over the past three months reflects a short-term bearishness.
INTC has recently unveiled the suite of new security features for the upcoming 3rd generation Intel Xeon Scalable platform. It has also launched its 11th Gen Intel Core processors with Intel Iris Xe graphics, the world’s best processors for thin-and-light laptops, delivering up to 2.7x faster content creation and more than 20% faster office productivity.
However, critics argue that INTC’s recent manufacturing hiccup in its 7-nanometer chips is letting Advanced Micro Devices (AMD) steal market share in both the data center and home computing markets. Moreover, the production problems run so deep that INTC is actually using third-party manufacturing services such as Taiwan Semiconductor Manufacturing (TSM) for the first time in many years.
Buy & Hold Grade: C
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, the stock is currently trading 21.8% below its 52-week high of $69.29.
Looking at the past three years, the stock has grown more than 44% despite the viciously competitive semiconductor industry, due to the strong GPU demand, rising data-centric revenue and diversified global business model. INTC’s top-line has grown at a CAGR of 8.6% during the same period. However, the on-balance volume (OBV) accumulation-distribution indicator continues to fall despite the slow-motion uptick and is now sitting at a four-year low, signaling the departure of institutional capital.
In words of the Chief Marketing Officer, Karen Walker, “We are a different company than we were even five years ago. We are actively executing against a new growth strategy, creating a new revenue mix, and pursuing new market segments fueled by data and the rise of artificial intelligence, 5G network transformation, and the intelligent edge.”
Peer Grade: D
INTC is currently rated #34 out of 86 stocks in the Semiconductor & Wireless Chip industry. Other popular stocks in the group are TSM, NVIDIA Corporation (NVDA) and AMD. All of these industry participants have performed better than INTC on a year-to-date basis. TSM, NVDA and AMD gained 51.8%, 81.4% and 135.1%, respectively, over this period.
Industry Rank: A
INTC is part of the StockNews.com Semiconductor & Wireless Chip industry, which is ranked #6 out of the 123 industries. The companies in this industry make semiconductors (computer chips), and other components used in electronic devices. The industry initially struggled to cope with the sudden market changes brought by the pandemic but the challenges reduced as demand eventually smoothened from the growing gaming, visual computing and data center spending.
Overall POWR Rating: C (Neutral)
Despite the positive earnings picture, INTC is rated “Neutral” due to growing competition within the industry, weak price momentum, and disrupted manufacturing chain as determined by the four components of our overall POWR Rating.
The work-and-learn-from-home associated with the coronavirus pandemic boosted INTC’s sales of PCs and server chips in the last quarter. The next-generation GPUs together represent a foundation upon which all of tomorrow’s most important technologies will be built, like self-driving cars, AI, automation, and cloud computing. INTC is one of the oldest and best-in-breed microchips suppliers, but is gradually losing business.
However, the stock has the potential to bounce after speeding up the rollout of the next chip generation. Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for INTC. Average broker rating of 1.95 indicates a favorable analyst sentiment. The market expects revenues for the current year to rise by 4.4% year-over-year. However, the consensus EPS estimate for the ongoing year indicates a 0.4% decline from the year-ago value.
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INTC shares were trading at $54.27 per share on Monday afternoon, up $0.11 (+0.20%). Year-to-date, INTC has declined -7.74%, versus a 7.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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