Intel Corporation

INTC Details

Intel Corporation (NASDAQ: INTC) creates microprocessors for personal computer and data centre businesses worldwide. Though the company has recently experienced manufacturing delays, it was a leading proponent of Moore's law for breakthroughs in semiconductor fabrication. Intel has been active in the mergers and acquisitions space, acquiring Altera, Mobileye, and Habana Labs to enhance its non-PC initiatives.

Latest News:

• Launched New Processors: On May 10, 2022, Intel has launched 12th Gen Intel Core HX Processors as World’s Best Mobile Workstation Platform

Financial Highlights: Q1FY22

• Intel’s revenue was USD 18.35 billion, decreased by 7% year over year in the quarter that ended on April 2, 2022, according to a statement. Intel’s gross margin narrowed to 50.4% from 55.2%. The fiscal quarter had 14 weeks.
• During the quarter Intel revamped its reporting structure and revealed a segment called Datacenter and AI, which includes chips, certain accelerators, memory and field-programmable gate arrays. Revenue from the segment jumped 22% to USD 6.03 billion. The company cited brisk demand from operators of large-scale data centers and enterprises.
• Q1FY22 GAAP earnings-per-share (EPS) was USD 1.98; non-GAAP EPS was US 0.87, which exceeded January guidance by USD 0.07.
• GAAP operating margin during the quarter under consideration improved to 27.7% vs 18.8% reported a year before.
• During the quarter, the company generated USD 5.9 billion in cash from operations and paid dividends of USD 1.5 billion.

Key Risks:

The company is exposed to a variety of risks including Inventory challenges could  persist in the second quarter, Covid lockdowns in China are ratcheting up supply fears, and inflation could reduce the PC market in the full year, and other macro risks as well.

FY22 Outlook:

For the full fiscal year, the company lifted its adjusted earnings guidance by 10 cents to USD 3.60 per share on USD 76 billion in revenue. Analysts polled by Refinitiv had been looking for adjusted earnings of USD 3.50 per share and USD 75.78 billion in revenue.

(Source: Company Filings)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM 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 share price has decreased by 17.3% in the past nine months and is currently leaning towards the lower end of its 52-week range (High USD 58.41 to Low USD 40.31). We have valued the stock using the EV / Sales multiple based relative valuation methodology and arrived at a target price of USD 49.43.

The company’s quarterly performance was a strong start to the year, exceeding expectations on both the top- and bottom-line. With a USD 1 trillion market opportunity ahead of company, they remain focused on IDM 2.0 strategy, executed well against that strategy in Q1, delivering key product and technology milestones and announcing plans to expand their manufacturing capacity in both the US and Europe to meet the continued demand for semiconductors and drive a more balanced, resilient global supply chain.

Hence, considering the company’s strong financial health, business model strength, reaffirmed full-year guidance, competitive advantage over competition, and valuation done, we recommend a “Hold” rating on the stock at the closing price of USD 44.55 as of May 27, 2022.

1-year technical chart as of May 27, 2022, Source: REFINITIV. Analysis by Kalkine group

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

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting 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.