Intel: A Tech Dividend Stock Worth Watching

seekingalpha2021-04-21

Summary Management's missteps allowed rivals to gain market share. Even so, Intel has grown revenues and remained highly profitable. Intel has a deep moat, and recent developments bode well for ...

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精彩评论

LowZackM
2021-04-22
LowZackM
LOVE intel
sarahtjm
2021-04-21
sarahtjm
Interesting
Kristo
2021-04-21
Kristo
Buy on intel
- Kencana:
  Also buy
JQChoo
2021-04-21
JQChoo
Intel vs Nvidia
TKCat
2021-04-21
TKCat
Seems like too big to fall but also not agile.
HOTBE
2021-04-21
HOTBE
Still profitable!

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Now losing market share, the firm is pressured on several fronts by competitors. At the same time, customers are designing chips to replace Intel’s offerings.\nHowever, despite a recent uptrend in the shares, Intel is trading at a bargain valuation, relative to other tech names. Even so, a reasonable argument can be made that the stock is a value trap.\nOn the other hand, bulls can point to the x86 series of microprocessors, Intel’s move to open two new foundries in Arizona, and a change in leadership as positives moving forward.\nMissteps, Nvidia, Advanced Micro Devices, And More\nAfter suffering through years of delay in deploying its 10-nanometer (NM) process technology, Intel recently announced its 7nm process is also behind schedule. The repeated delay with 10-nm resulted in Taiwan Semiconductor Manufacturing (TSM) gaining a technological lead on Intel.\nHowever, Intel’s second row seat in the foundry business is not the only concern. Rival Advanced Micro Devices (AMD) has combined TSM’s process technology with innovative designs to capture a larger portion of the CPU market. The following chart provides a snapshot of the toll this has taken on Intel’s market share over the years.\nSource: Metrics Statista / Chart by Author\nJP Morgan analyst Harlan Sur estimates AMD has an 8% to 9% share of the x86 server CPU market and forecasts the company will gain an additional 2% to 4% of the market over the next two years.\nThe following excerpt from a performance review of AMD Ryzen 5000 series gives cause for additional concern.\n\n With the Ryzen 5000 series, it's fair to say that AMD has finally, and fully, eclipsed Intel's performance dominance in desktop PCs...According to our tests, the Ryzen 5000 processors deliver, beating Intel in nearly all metrics that matter, including performance, power consumption, and thermals, and largely remove Intel’s performance lead after overclocking.\n\nHowever, the competition between the two is fierce and constantly evolving. The above article was written in November. Two weeks ago, the same author had the following comment regarding the debut of Intel’s newly introduced Rocket Lake-S CPUs.\n\n Intel fired back, though, with its 11th-generation Rocket Lake-S CPUs. We have the full details in our Intel Core i9 and Core i5-11600K review, but Intel has improved its competitive standing tremendously. The Core i9-11900K now vies for CPU gaming benchmark supremacy with the best Ryzen chips.\n\nI point this out to highlight that circumstances can change rapidly in this industry, and that investors, whether in the bull or bear camp, may not be armed with the most relevant data.\nAside from AMD, Intel has formidable competition from Nvidia(NASDAQ:NVDA). After dominating the data center market for years, Intel is now faced with Nvidia’s graphics processor units (GPUs), which are more capable of handling the heavy workloads associated with artificial intelligence.\nOf greater concern is Nvidia’s prospective acquisition ofARMLimited from Softbank. If the deal is approved, ARM’s processors are more power and cost efficient than x86 chips. This could lead to Nvidia garnering a larger share of the data center market, which, along with cloud computing, represents about a third of Intel’s revenues. .\nAs if competition from chip makers is not enough, several of Intel’s customers are intent on making their own semiconductors. Amazon(NASDAQ:AMZN)began using its own ARM based processors in place of Intel’s chips two years ago.\nLate last year, Apple (NASDAQ:AAPL)unveiled its M1, achipdesigned specifically for Mac. That was followed by Microsoft’s (NASDAQ:MSFT) announcement that it is pursuing the development of an ARM based processor for its servers. That company is also mulling over the use of a differing chip for its Surface devices.\nNote the move by these corporations to ARM technology. ARM licenses its architecture to partners, allowing others to customize chips to meet specific needs. While Intel’s chips have superior performance, ARM chips provide a level of customization the former company cannot match.\nWhere The Bears May Be Missing The Boat\nThe majority of personal computers, laptops, servers, cloud computing devices, and game consoles utilize x86 architecture. Initially based on the 8086 processor, x86 is a family of instruction set architectures. Today, only INTC and AMD produce modern x86 designs, and the former company holds the lion’s share of that market.\nOf great importance is that practically all software designed for PCs and servers is written specifically for x86 architecture. Since rivals cannot make an x86 chip without a license, this provides a near bulletproof barrier for those wishing to supplant Intel’s chips with a differing design.\nPC gaming is also centered on x86 processors. In general, x86 platforms provide more powerful CPUs and GPUs, resulting in maximal gaming performance. Once again, PC games would have to be re-written for ARM based computers, an unlikely scenario over the short to mid term.\nAside from the deep moat provided by x86, there is a widely held and pervasive myth that Intel’s chips are inferior to rivals. This is perpetuated by the claim that Intel has 10nm chips versus TSM’s and Samsung’s 7nm processes. The fact is that the former company’s 10nm are roughly on par with other companies’ 7nm offerings.\nAs I don’t want to unnecessarily lengthen this article by expounding on this topic, I refer readers to this link for greater understanding of the issue. Suffice it to say that simply because the industry uses the terms 10nm and 7nm does not mean that Intel is years behind the competition.\nFurthermore, a recent initiative by the company could result in increased long term revenues. Management is touting plans to construct two semiconductor foundries in Arizona. While any boost to earnings is years down the road, and related capex will be quite large, CFRA characterizes the foundry opportunity “as massive” and estimates the market by 2025 at $100 billion.\nSince over half of INTC’s revenues are related to computers, the surge in demand for those devices represents a strong tailwind. IDC forecasts an 18.2% growth in global PC shipments in 2021.\nAnother area of strength for Intel is the server market. A study by MarketersMEDIA projects a CAGR of 4.8% for the data center server market from 2020 through 2025.\nLast but not least, the global data chip market is projected to grow at a CAGR of 9.4% through 2025.\nSource: Allied Market Research\nMobileye\nAround four years ago, Intel acquired Mobileye, a developer of systems designed for autonomous vehicles. A week ago, Intel inked a deal with Udelv to provide self-driving systems for that firm’s planned fleet of autonomous delivery vehicles. Udelv will initiate operations with a self-driving fleet in 2023, and plans to produce more than 35,000 Mobileye equipped transportation vehicles by 2028.\nOne More Consideration\nThere is no doubt, INTC is facing headwinds. However, despite fierce competition and manufacturing delays, a review of the last few years results indicates the company has fared rather well. The following two charts provide the annual revenues and EPS over the last four years.\nSource: Metrics Seeking Alpha / Chart by author\nSource: Metrics Seeking Alpha / Chart by author\nFor a company that has supposedly lost its course, revenues and EPS are faring well.\nIntel’s Dividend History And Debt\nIntel’s current yield is 2.15%. The five year dividend growth rate is 6.42% and the payout ratio is a bit over 30%. Therefore, the dividend is safe and certain to grow.\nIntel’s credit ratings are upper medium investment grade.\nIntel’s Valuation\nWhile conducting due diligence on Intel, I found a wide discrepancy in the PEG provided by differing sources. Yahoo Finance has a PEG of 2.85, Schwab’s PEG is 2.41, and Seeking Alpha lists a PEG of 1.69. I attribute this to a high level of uncertainty associated with the stock.\nSurprisingly, the trailing and forward P/E ratios are nearly congruent. SA has a TTM P/E of 13.11x and a forward P/E of 15.05x.\nIntel’s shares trade for $63.25. The average 12 month price target of 38 analysts is $63.60. The price target of the 15 analysts rating the stock since the last quarterly report is $67.00.\nI should add that the analysts rating the stock since the last quarterly reporter provided is the greatest range in target prices that I can recall. Valuations range from $43 to $80. Like the wide variance seen in the PEG metrics, I attribute this to the high degree of uncertainty in Intel’s short to mid term prospects.\nIs Intel Stock A Buy?\nThere is no doubt that management dropped the ball in recent years, allowing competitors to not only gain market share but to gain parity in some respects to Intel’s technological position.\nEven so, Intel still commands 90% of the server market and 80% of the PC market. Furthermore, the firm’s positioning in other markets, as demonstrated by Mobileye and the move to gain a larger share of the foundry spend, could lead to additional revenue streams.\nSwitching from x86 to ARM, while not impossible, is a formidable task. If that revolution occurs, it will not happen overnight.\nAn additional positive is that the company is a cash flow machine. In Q4, Intel had a gross margin of 56.8%, an operating margin of 28.5%, and net income of $5.9 billion. Compare that to AMD’s total annual revenues of under $10 billion, or Nvidia’s net income last fiscal year of $4.3 billion.\nTherefore, in a sector that requires constant technological growth, Intel’s ability to fund R&D at levels far above most rivals is a significant advantage. To place Intel’s budget in perspective, over the last four years the company’s R&D spend equaled that of AMD and Qualcomm(NASDAQ:QCOM)combined.\nAnother consideration is that many in the industry view Pat Gelsinger, the new CEO, as the man to lead Intel into a new era.\nWith all of this in mind, I rate Intel as a BUY.\nI will add, however, that I consider it more of a long term bet. I would not be surprised to see a better entry level for the stock sometime this year. Consequently, I made a small entry level investment in the shares today. I also sold puts with a strike of $58.00 and an expiry of 5/7/21.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":378659552,"gmtCreate":1619027294676,"gmtModify":1634289116646,"author":{"id":"3573568310387546","authorId":"3573568310387546","name":"LowZackM","avatar":"https://static.tigerbbs.com/768e9ec80d5d9568297fe487c4b4c95a","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3573568310387546","authorIdStr":"3573568310387546"},"htmlText":"LOVE intel","listText":"LOVE intel","text":"LOVE intel","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/378659552","repostId":1139317081,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":378150973,"gmtCreate":1619012433592,"gmtModify":1634289236574,"author":{"id":"3581813176999956","authorId":"3581813176999956","name":"sarahtjm","avatar":"https://static.tigerbbs.com/20cc01856142071ebc599ac7b6395c13","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581813176999956","authorIdStr":"3581813176999956"},"htmlText":"Interesting","listText":"Interesting","text":"Interesting","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/378150973","repostId":1139317081,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":378162941,"gmtCreate":1619011839683,"gmtModify":1634289245845,"author":{"id":"3557634928383187","authorId":"3557634928383187","name":"Kristo","avatar":"https://static.tigerbbs.com/07075676425d47f31685477722d0d415","vip":1,"crmLevel":7,"crmLevelSwitch":0,"idStr":"3557634928383187","authorIdStr":"3557634928383187"},"htmlText":"Buy on intel","listText":"Buy on intel","text":"Buy on intel","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/378162941","repostId":1139317081,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4094779,"gmtCreate":1619017346872,"gmtModify":1635514617511,"authorId":3580435285853971,"author":{"id":3580435285853971,"idStr":"3580435285853971","authorId":3580435285853971,"name":"Kencana","avatar":"https://static.tigerbbs.com/d5da0f3d018441c0cf9337b491f6d15a","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":378162941,"type":1,"supId":0,"prevId":0,"content":"Also buy","text":"Also buy","html":"Also buy"}],"langContent":"EN"},{"id":378130249,"gmtCreate":1619008935881,"gmtModify":1634289265675,"author":{"id":"3572285456919805","authorId":"3572285456919805","name":"JQChoo","avatar":"https://static.tigerbbs.com/dd257169c45f26ad9c6a7d59cb32b68a","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3572285456919805","authorIdStr":"3572285456919805"},"htmlText":"Intel vs Nvidia&nbsp;","listText":"Intel vs Nvidia&nbsp;","text":"Intel vs Nvidia","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/378130249","repostId":1139317081,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":378351796,"gmtCreate":1619004507615,"gmtModify":1634289298625,"author":{"id":"3575764061064234","authorId":"3575764061064234","name":"TKCat","avatar":"https://static.tigerbbs.com/99ee288f493a95ddc49f6f7bbeb74457","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3575764061064234","authorIdStr":"3575764061064234"},"htmlText":"Seems like too big to fall but also not agile.","listText":"Seems like too big to fall but also not agile.","text":"Seems like too big to fall but also not agile.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/378351796","repostId":1139317081,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":378327099,"gmtCreate":1619004105911,"gmtModify":1634289301835,"author":{"id":"3576325295778787","authorId":"3576325295778787","name":"HOTBE","avatar":"https://static.tigerbbs.com/4f535d0d25c5b9833a0f75cd652fbbcd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3576325295778787","authorIdStr":"3576325295778787"},"htmlText":"Still profitable!","listText":"Still profitable!","text":"Still profitable!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/378327099","repostId":1139317081,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":23,"commentSize":9,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; 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