Despite broader market and geopolitical concerns, Intel Corporation (NASDAQ:INTC) handled itself surprisingly well. Year-to-date, Intel stock is up 10%, which ordinarily may not generate much excitement.
However, when competitors Advanced Micro Devices, Inc. (NASDAQ:AMD) and Qualcomm, Inc. (NASDAQ:QCOM) are down sharply, the INTC rally suddenly looks more impressive.
More importantly, Intel stock is handily beating the overall technology industry. The benchmark exchange-traded fund Technology Select Sector SPDR Fund (NYSEARCA:XLK) is turning out a pedestrian 1% YTD performance. Recent news that President Trump is open to international dialogue amid the China tariff controversy has also boosted sentiment.
Back in February, I cautioned readers that while INTC stock is a fundamentally sound investment, things could get rough. At the time, the benchmark indices were recovering from a severe fallout. Although Intel has strong fundamentals, no company is immune from market panic. During such uncertainties, it’s best policy to assume at least some negative impact.
So far, Intel stock has proven my cautionary tone overly pessimistic. Since my write-up, INTC has gone up 13%. Still, I wouldn’t lose my vigilance. Again, I reaffirm my overall bullishness toward the company. However, I don’t want to discount the choppiness in the overall market. While I trust Intel, I don’t trust the major indices.
Also, please keep in mind that news regarding the China tariffs has flip-flopped almost comically. Leading up to the tariffs, economists warned the Trump administration that punitive measures could lead to devastating retaliations. Next came stories that the tariffs weren’t all that bad, followed immediately by reports of more devastating economic impact.
Now, we’re back to business as usual. With such devastatingly brilliant forecasting, I wouldn’t get too crazy on INTC stock just yet. That said, when the storm finally fades, you’ll definitely want exposure.
It’s All About the Fundamentals for Intel Stock
It’s easy to get lost in the market’s noise largely because the noise drives nearer-term sentiment. But what keeps Intel stock in the game year in and year out is the fundamentals.
In particular, investors should keep an eye on its revenue growth relative to operating expenditures. In 2016, every dollar spent on operating expenses yielded $2.77 of revenues. Last year, that metric jumped to $3.02, or a massive 9% increase. Despite being an industry stalwart (and thus, theoretically slower to change), INTC stock has become a leaner and meaner asset.
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Compare this with Qualcomm, where the metric is going the wrong direction. On the other side of the spectrum, AMD has improved its efficiency, just like Intel. The difference, though, is that Intel has been growing its top line over the last few years, while AMD is recovering from extended periods of stagnation.
More importantly, you should key in on the company’s expenditure quality. Every organization spends money — the difference between good and bad organizations is where they spend it.
For INTC, it’s all about innovation and advancing technologies. That’s why SGA and other operating expenses have gone down 8% and 40%, respectively, while research and development increased 13.5%.
You can’t say that about all its rivals. Going back to Qualcomm, its SGA expenses have steadily risen, while R&D has produced hardly a blip. While other factors are at play, I’m not surprised that QCOM shares have dipped from their highs. On the other hand, I’m also not surprised why the Intel stock price has held up so well.
Intel’s Innovations Are Easier to Sell
Ultimately, these positive fundamentals make Intel’s innovations far more believable than the rest. Sure, every company touts their latest and greatest products and services as “groundbreaking.” But with INTC, you can tell their pitches aren’t just marketing attractions. They’re walking the walk, which makes the lofty Intel stock price very justifiable.
Additionally, longer-term investors should keep in mind that INTC stock is likely to win an attrition war. In today’s market, it may not come down to who has the better product; it may just be as simple as who’s the last standing. Since Intel has cut the fat and invested where it matters, the company is simply better positioned than most.
I concede that Intel stock is mired in less-than-ideal market conditions. I’ll repeat myself: you have to be careful as we’re not out of the woods yet. But I really like what I’m seeing because Intel is built for the long haul.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
