Similar to most other stocks, shares of Intel (INTC) have also been volatile in 2020. The stock is trading at $58.4 at the time of writing, May 13, and has returned -4 per cent since the start of this year, compared to the S&P 500 (US500) decline of 12 per cent.
While the dreaded coronavirus continues to impact several industries, let’s deep-dive into the company’s financials and business trends to answer the question: What are Intel shares: buy or sell?
Intel’s first-quarter results: could the company impress investors?
In the first quarter of 2020, Intel reported revenue of $19.8bn, a growth of 23 per cent year-over-year. Its data-centric revenue was up 34 per cent while PC-centric sales grew 14 per cent year-over-year.
Data-centric sales were up on the back of strong cloud service provider revenue that increased 53 per cent. Sales in the PC-centric segment were impacted by improved strength in CPU supply and demand as individuals continued to largely work from home.
The company’s double-digit revenue growth also drove non-GAAP earnings higher by 63 per cent in Q1. Comparatively, Wall Street analysts forecast revenue of $18.7bn and earnings of $1.28 for this period.
Intel generated $6.2bn in operating cash flow and $2.9bn in free cash flow. In order to tide over short-term liquidity issues, the semiconductor giant announced the suspension of its share buyback programme and the infusion of $10.3bn in new debt.
Intel revoked its guidance for 2020 due to ongoing macroeconomic uncertainty that might impact demand in the next few quarters. In the second quarter, Intel expects sales of $18.5bn and earnings of $1.10.
After publishing its financial results, Intel shares were down 6 per cent in after-hours trading on April 23.
Reasons to say ‘yes’: should I buy Intel stock in May 2020?
Intel is optimistic about its long-term growth drivers. The company’s management believes they are well poised to take advantage of the largest market opportunity in its history. The transition to the Internet of Things has redefined Intel Inside as the semiconductor heavyweight has expanded its silicon offering to include GPUs (graphics processing unit), ASICs (application-specific integrated circuit), FPGAs (field-programmable gate array) and much more.
Intel expects growth to accelerate in its cloud and networking businesses that help customers store and process data. Amid the ongoing crisis, the company has been instrumental in scaling to support vital workloads for the enterprise.
The growing demand has helped Intel scale its cloud and communications service provider business by 53 per cent and 33 per cent respectively in Q1. These two businesses now account for 70 per cent of the Data Center revenue.
Technology inflections will move the data revolution needle in the artificial intelligence, 5G and intelligence edge verticals, with Intel standing at the forefront of this disruption. The firm has forecast its total addressable market at $300bn, giving it enough opportunity to increase top-line growth in 2020 and beyond.
Market research firm IDC estimates 75 per cent of enterprise applications will use some kind of AI tech by 2021, and Intel is investing heavily in this high-growth vertical. Due to unrivalled AI performance, Cascade Lake is Intel’s fastest ramping Intel Xeon processor. Backed with a strong product portfolio, Intel generated billions in AI-driven sales in 2019. The upcoming transition to 5G will also boost demand for computing throughout the network.
Intel continues to ramp-up investments in growth segments such as transportation and mobility. It eyes a multi-billion-dollar opportunity in sectors such as autonomous vehicles and advanced driver-assistance systems.
In 2017, Intel acquired Mobileye for a massive $15.3bn to gain traction in the automotive space. Moreover, the leading chip-maker has recently announced a $900m acquisition of Moovit, an Israel-based mobility-as-a-service company. It has estimated the mobility space to be worth a whopping $160bn by 2030.
Two sides of the same coin: why should I sell my Intel stock?
We can see that Intel is aggressively investing in growth segments and now aims to be a market leader in the mobility space as well. However, these acquisitions and investments are long-term plays and might not interest growth investors.
In 2019, Intel’s automotive business (Mobileye) generated sales of $879m and accounted for fewer than 1.5 per cent of total sales. The company is still dependent on core businesses to generate revenue despite massive investments in other verticals.
According to data from Yahoo! Finance, analysts expect Intel to increase sales by 2.5 per cent in 2020 and this growth stands at a marginal 0.6 per cent in 2021. Comparatively, its earnings are forecast to decline by 1.8 per cent this year and increase by 1.5 per cent in 2021.
When we compare Intel’s forward price to earnings multiple of 12.2 to these growth rates, we can see that the stock might move lower if the sell-off persists. Its forward dividend yield of 2.3 per cent is not too attractive for dividend investors either.
Finally, the Intel stock performance in the past decade does not inspire confidence as the stock has grossly underperformed broader markets and peers.
In the last 10 years, Intel stock has returned 153.4 per cent. Comparatively, the Technology ETF (XLK) is up 305.3 per cent while AMD and NVIDIA have returned 472 per cent and a staggering 2,006 per cent respectively.
INTC stock analysis: what experts have to say about its future
Let’s take a look at what future analysts are predicting for the company in the next 12 months. According to the latest Intel stock reviews published on The Fly,
- Wells Fargo maintained an Equal Weight rating and increased Intel’s target price from $56 to $60;
- Mizuho lowered Intel’s target price from $71 to $67 and maintained a “Buy” rating;
- Rosenblatt is bearish on Intel with a price target of $45 and a “sell” rating;
- Cowen reduced Intel’s target price from $64 to $60 and kept a Market Perform rating;
- RBC Capital maintained an Underperform rating and lowered Intel’s target price from $55 to $52;
- BMO Capital (BMO) lowered Intel’s target price from $65 to $55 while maintaining a Market Perform rating;
- Investment banking giant Morgan Stanley maintains an overweight rating with a stock price target of $61 for Intel;
- Baird is extremely bullish on Intel and has reiterated an Outperform rating with a target price of $85;
- JP Morgan (JPM) expects Intel to outperform markets and keeps an Overweight rating and a price target of $80.
So, is Intel stock a good buy right now?
Based on the information provided above, is Intel stock a buy right now? Well, just like any other investment, it can give no guarantee of financial success.
If you are interested in short-term investments that can bring large gains in a matter of a few weeks or months, then it may not be the perfect time to pour your cash into this tech giant.
On the other hand, if you are viewing Intel as a long-term investment, the chances are the company may bring some substantial growth to your portfolio in the next couple of years.
If you think you are not ready to make long-term investment commitments, but still want to try to profit from the price volatility, you can do so through contracts for difference (CFD) trading.
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So, what are your bets on the company’s future? What do you think: is Intel stock a good buy?
Make your own predictions based on the latest Intel performance by checking out our comprehensive up-to-date chart.