Intel Corporation

INTC Details

Intel Corporation (NASDAQ: INTC) creates and produces microprocessors for the worldwide markets for personal computers and data centres. Intel invented the x86 architecture for microprocessors. The transition to the cloud has benefitted Intel's server processor business; the company has also been growing in other areas while the personal computer market has remained flat. Intel has been active on the merger and acquisition front, purchasing Altera, Mobileye, and Habana Labs.

Latest News:

• Board Appointment: On June 8, 2022, Intel Corporation announced April Miller Boise's appointment as executive vice president and chief legal officer. She is taking over as head of Intel's international legal, trade, and government relations division on July 6. Steven Rodgers, who retired this year after more than 20 years at Intel, is succeeded by Miller Boise.
• RSA Conference Highlights: The focus of the RSA Conference on June 7, 2022, was on Intel's most recent security advancements, cutting-edge product capabilities, demos, and real-world use cases.

Q1 FY22 Results:

• Revenue Exceeding Guidance: The company's revenue of USD 18.4 billion, which was slightly higher than expected, was principally driven by the success of the NEX business.
• Industrywide Comparison of Earnings and Margins: In comparison to the industry standard of 19.7%, the company's operating margins were greatest in Q1 FY22 at 29.6%, while its return on equity was greater than average at 8.2%. Due to increased gross profit and marginally reduced operating expenditures, EPS of 87 cents was 7 cents better than the company's estimates.
• Cash Flow from Financing Activities during the Quarter: The quarter's operational cash flow was USD 5.9 billion, and it also earned USD 4.6 billion from the sale of McAfee stock. The sale of McAfee and the sale of NAND led to a USD 9.7 billion boost in total cash and investments during the quarter, bringing it to USD 39 billion. Whilst totalled capex was USD 4.6 billion in Q1 FY22.

FY 2022 Outlook:

(Source: Company Filings) 

Key Risks:

• Industrywide Intense Competition: The market is highly competitive, and it is also impacted by quick technology and market advancements, shifting industry standards, and improved products. INTC anticipates that the competitive landscape will only get more intense in the future.
• Macro-Economic Risks: Demand shifts, record inflation, commodity price volatility, and ongoing semiconductor problems can all cause long-term disruptions to the global IT business.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

INTC reported a solid Q1 FY22, exceeding revenue and EPS predictions despite inflationary pressures and macroeconomic variables. By the end of the second half, the firm expects growth in its two remaining businesses as Mobileye and IFS ramp up new products. The company announced its intent to acquire Tower Semiconductor, through which INTC will own one of the industry's largest portfolios of distinctive technologies.

Based on the revenue performance, higher profitability margins, robust profits in new businesses, strong cash position, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current market price of USD 38.42 as of June 24, 2022, at 07:09 AM PDT.

1-Year Technical Price Chart (as of June 24, 2022, at 07:09 AM PDT). Source: REFINITIV, Analysis by Kalkine Group 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.