- Intel’s (INTC) recently reported first quarter results were better than expected.
- The company is undertaking a massive growth strategy in the U.S. and abroad.
- INTC stock has outperformed its main rivals and the broader market year-to-date.
Should investors take a chance on chipmaker Intel (NASDAQ:INTC) after its latest earnings results? The recently reported first quarter (Q1) was largely positive, with the company beating on both the top and bottom lines. However, looking ahead, Intel lowered its guidance for the current second quarter, which caused concern among some analysts and investors.
Yet, INTC stock is managing to hold its own in a tough market. Year-to-date (YTD), Intel’s shares are down 11.9% at $45.42 a share. That compares to a 21% decline for the tech-laden Nasdaq Index on which Intel trades. The Nasdaq has officially entered bear market territory for the year. While Intel’s stock performance hasn’t been great, it has been better than its microchip rivals Nvidia (NASDAQ:NVDA), which is down 33% YTD, and Advanced Micro Devices (NASDAQ:AMD), which is down 36% YTD.
Strong Q1 Results
For the first quarter, Intel reported earnings per share (EPS) of 87 cents compared to 81 cents expected by Wall Street, according to Refinitiv data. The company’s revenue came in at $18.4 billion, which also beat the $18.31 billion expected by analysts. While overall positive, Intel noted that revenue for its Client Computing Group, which includes personal computer chips, fell 13% in the quarter from a year ago to $9.29 billion. That decline was blamed on Apple (NASDAQ:AAPL) adopting its own chips and processors and ceasing to buy them from Intel. Still, the Q1 results can be viewed as a success.
The forward guidance provided by Intel was more problematic. The Santa Clara, California-based company forecast second quarter EPS of 70 cents and $18 billion in revenue. Analysts had expected EPS of 83 cents and revenue of $18.38 billion. For the full year, Intel lifted its earnings guidance by 10 cents to $3.60 per share on $76 billion in revenue. That was ahead of the $3.50 EPS and $75.78 billion in revenue that Wall Street had been looking for. Unfortunately, the Q2 guidance grabbed the headlines and INTC stock immediately slumped 4% after the results were made public.
Growth And Expansion
Earnings aside, Intel has some very big and ambitious plans underway. The company is in the process of acquiring foundry company Tower Semiconductor (NASDAQ:TSEM) for $5.4 billion in a deal that will help Intel manufacture more of its own chips. Additionally, Intel is spending $20 billion to construct two new plants in Ohio that will make advanced microchips. The company has called the Ohio plants its first step toward development of a mega-site that will eventually house eight separate chip factories at a cost of $100 billion. The company also recently increased its quarterly dividend to 36 cents, bringing the yield to 3.25%.
Plus, Intel is planning to spend $19 billion to construct a chip plant in Germany, helping to expand its European reach and market share. All in all, Intel has committed to spend $88 billion to bolster its operations in Europe over the next decade. It is part of Intel’s plan to retain its title as the world’s biggest semiconductor chip manufacturer and hold rivals Nvidia and AMD at bay. However, despite its big growth plans, Intel has pushed back the release of several highly anticipated chips. The company announced a few months back that its new server chip will now come out in 2024 rather than 2023. There have also been other delays announced by the company.
Treat INTC Stock as a Long-Term Investment
Intel is doing a lot of things right and its financial position is improving. The company clearly has a long-term growth strategy in place and plans to recover from Apple making its own microchips for devices such as the iPhone and Mac computer. That said, Intel is not a high growth tech start-up. This is an established company that is finding new ways to remain competitive in a technologically advanced world. Investors should keep this in mind and plan to buy and hold Intel stock for the long haul. As it undertakes its growth strategy, INTC stock is a buy.
On the date of publication, Joel Baglole held long positions in NVDA and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.