The big question surrounding Intel (NASDAQ:INTC) stock these days has nothing to do with the company itself. Instead, Intel’s struggles circle on the novel coronavirus that is spreading around the world.
This has led to many questions from investors. For example, will computer companies continue to need semiconductors while the global economy struggles to emerge from a likely recession? And how will that weigh on semiconductor profits for the rest of the year, and perhaps even into 2021?
Intel released first-quarter earnings in April that provided insight into those questions, but for some reason, some analysts remain skeptical about the world’s second-largest semiconductor company.
Here’s a closer look at this California-based giant, whose products are best known for powering HP (NYSE:HPQ) and Dell (NYSE:DELL) computers.
Intel Stock at a Glance
Returns for Intel stock over the first four months of the year have been a veritable wash — after a 14% gain and a 25% loss, Intel has battled back in recent weeks to finish April at almost the same place it started the year.
That’s a disappointment, considering Nvidia (NASDAQ:NVDA) is up 24% year-to-date, while another competitor, Advanced Micro Systems (NASDAQ:AMD) is up more than 14%.
First-quarter earnings posted on April 23 included revenue of $19.83 billion, beating analysts’ expectations of $18.7 billion. Earnings were $1.45 per share, versus the $1.28 that analysts expected.
Intel itself had expected revenue of $19 billion, and noted that its quarterly revenue was a 23% gain on a year-over-year basis. CEP Bob Swan spoke glowingly of the company’s results:
“Our first-quarter performance is a testament to our team’s focus on safeguarding employees, supporting our supply chain partners and delivering for our customers during this unprecedented challenge … The role technology plays in the world is more essential now than it has ever been, and our opportunity to enrich lives and enable our customers’ success has never been more vital. Guided by our cultural values, competitive advantages and financial strength, I am confident we will emerge from this situation an even stronger company.”
Guidance, however, was a disappointment. Intel says it’s expecting $18.5 billion in the second quarter at earnings per share of $1.10, versus analysts’ expectations of $17.97 billion and earnings of $1.19 per share. The company did not issue full-year guidance, but said it’s expecting less demand from enterprises and government clients in the second half of 2020.
Morgan Stanley analyst Joseph Moore has an “overweight” rating on Intel, but noted the company is already close to his $61 price target and faces stiffening competition.
“Cloud spending should be more durable, but after this most recent surge, some digestion seems possible, and Intel’s share loss to AMD will primarily come in the cloud service provider segment, while the enterprise and government segments where barriers to entry are much higher should be very soft as purchasing is impacted by the declines in employment,” he says.
The Bottom Line on Intel Stock
If anything, Intel seems to be suffering from overblown expectations. While the stock is relatively flat for the year, it’s doing much better than the Dow Jones Industrial Average.
The company had a blowout first quarter, but some analysts are raising alarms about future earnings — even as some U.S. states start lifting coronavirus restrictions in hopes that the worst of the virus is behind us.
However, when you look at Intel’s position in the space, with $75 billion in annual revenue, gross profits of $42 billion, a reasonable price-earnings ratio of 11.6 and a solid dividend yield of 2.25%, it’s clear that this is a company that is is a stable earner that is well-positioned to push through the coming months.
Intel stock gets a strong “A” rating in my Portfolio Grader, and because it’s a good dividend stock, it also earns a “B” rating in my Dividend Grader tool.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
