Should You Buy This NASDAQ-Listed Technology Major – INTC

Intel Corporation

INTC Details

Intel Corporation (NASDAQ: INTC) is a global technology leader in microprocessor design and manufacturing for the personal computer and data centre markets. The company's revenue streams include the Data Centre Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solution Group (NSG), Programmable Solutions Group (PSG), Client Computer Group (CCG), and other related divisions. Platform goods such as central processing units and chipsets, system-on-a-chip and multichip packages, accelerators, boards and systems, connection devices, memory and storage products, and platform goods such as central processing units and chipsets are all available.

Latest News:

• Investment in Growth Capex: On March 15, 2022, Intel announced the first phase of its plans to invest up to 80 billion euros in the European Union over the next decade across the entire semiconductor value chain, from R&D to manufacturing to cutting-edge packaging technologies. Plans to invest an initial 17 billion euros in a cutting-edge semiconductor fab mega-site in Germany, establish a new R&D and design hub in France and invest in R&D, manufacturing, and foundry services in Ireland, Italy, Poland, and Spain are all included in the announcement. Intel intends to bring its most advanced technology to Europe with this significant investment, establishing a next-generation European chip ecosystem and addressing the need for a more balanced and resilient supply chain.

FY21 Results:

• Flat Revenues: The company reported revenues of USD 79.02 billion in FY21, reporting a 49% increase from USD 77.87 billion in FY20 (ended December 26, 2020), exceeding October guidance by USD 1.2 billion.
• Slight Drop in Bottomline: Net income was USD 19.87 billion in FY21, compared to USD 20.90 billion in FY20.
• Quarterly Dividends: On January 26, 2022, the company declared a quarterly dividend of USD 0.365 per common share (a 5% increase in quarterly cash dividends), paid on March 01, 2022, to shareholders of record on February 07, 2022.
• Cash and Debt Position: The company had USD 28.41 billion in cash and cash equivalents (including short-term investments) as of December 31, 2021, and total debt of USD 38.10 million.

Key Risk:

• Customer Concentration Risk: INTC's three largest customers accounted for 43% of revenue in FY21 (39% in FY20 and 41% in FY19), with Dell Inc. accounting for 21% (17% in FY20 and 17% in FY19), Lenovo Group Limited for 12% (12% in FY20 and 13% in FY19), and HP Inc. accounting for 10%. (10% in FY20 and 11% in FY19). As a result, if a company relies too heavily on a few clients, its long-term financial health may suffer.
• Global Operational Risk: Sales outside the United States accounted for 82% of revenue for the fiscal year ended December 25, 2021, with revenue from billings to China accounting for 27%. As a result, many global and regional factors beyond its control may jeopardize the company's operational and financial health.

Outlook:

Q1FY22 Outlook (Source: Earnings Release, Q4FY21, January 26, 2022)

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

INTC’s stock price has fallen 25.21% in the past twelve months and is currently leaning towards the lower end of its 52-week range of USD 43.63 to USD 68.49. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 58.49.

Considering the significant correction in the stock price, reduction in debt, solid margins and ROE, recent capital investment, positive outlook, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the current price of USD 47.685, up 0.55% as of March 21, 2022, at 11:23 AM ET.

Three-Year Technical Price Chart (as on March 21, 2022, at 11:23 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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.