Posts Tagged ‘intc’

  • Intel Is Back Where It Was in 1997
    , November 14th, 2012 at 1:10 pm

    Yesterday, I highlighted Microsoft ($MSFT) and its relatively cheap valuation. Today I want to look at a stock that’s often paired with Microsoft: Intel ($INTC). The stock has been doing terribly lately. Shares of Intel are at a fresh 52-week low today. In May, Intel was over $29 and today the stock nearly broke below $20 per share. The stock first broke above $20 in early 1997. That was the same year that Intel’s CEO, Andy Grove, was named Time’s “Man of the Year.”

    Intel’s last earnings report wasn’t terribly good, but Wall Street’s expectations were even worse. For Q3, the company earned 58 cents per share which was eight cents better than estimates. Earnings were down 11% from the same period one year before. Sales were down by 5%.

    After exceeding analysts’ expectations following the 2007-2008 financial crisis, the company’s sales in recent months have slowed as demand for its microchips has weakened. Fearing the trend could continue, several analysts last week cut their estimates of the chipmaker’s financial prospects, sending its stock price to its lowest level in a year.

    While the sluggish worldwide economy has contributed to Intel’s troubles, a more fundamental worry is its dependence upon personal computers. Its brainy microprocessors power about 80 percent of PCs, whose sales have dwindled as consumers have turned to smartphones and tablets. As a result, Intel is trying to get its chips into those mobile devices.

    The company is beginning to have some luck in that regard. But its chips face intense competition from those using an alternative design from British firm ARM Holdings. Traditionally consuming less energy and, thus, providing longer battery life, the ARM camp dominates the mobile device market.

    Even if Intel has success with its push into smartphones, the company is likely to remain so dependent on the stagnant PC market that its finances probably won’t improve much over the next 18 months, according to a note Bernstein Research sent their clients last week.

    Now let’s look at some numbers. Intel currently pays a quarterly dividend of 22.5 cents per share. This was raised from 21 cents per share earlier this year. At 90 cents for the year, a $20 share price works out to a big fat yield of 4.5%.

    Intel’s earnings estimates for next year have been dropping like a stone. Three months ago, the Street had been expecting 2013 earnings of $2.55 per share. Today the consensus is for $1.97 per share. By my simple valuation method, Intel has a fair value of $27.41.

  • Intel Slides on Lower Guidance
    , December 12th, 2011 at 1:12 pm

    Intel ($INTC) is getting clipped today on news that it’s lowering guidance.

    Intel, a technology bellwether, said it now expected fourth-quarter revenue of $13.4 billion to $14 billion. It had previously forecast revenue of $14.2 billion to $15.2 billion for the holiday quarter.

    Analysts polled by FactSet were expecting revenue of $14.65 billion.

    Intel is the world’s largest maker of microprocessors, the brains of computers. The company said it expected personal computer sales to be up from the previous quarter. But it said computer makers are reducing inventories and microprocessor purchases because of hard drive shortages.

    Intel has been a supremely frustrating stock for us because I’ve played it exactly wrong — or perhaps we were too early. Still, I always want to look at our bad calls to see what we can learn.

    I had Intel on last year’s Buy List and it started off as a good position for us. By April, it was an 18% winner for us. The stock then dropped about 25% and recovered to make us a slight gain for the year but it still trailed the overall market.

    After a lot of consideration, I felt that my original thesis no longer held and I decide to boot it from the Buy List for this year. Once again, I was right — at first. Intel underperformed the market at the beginning of this year, then around April it started a large out-performance.

    The stock has beaten earnings pretty consistently for the past few years. I had even considered adding back on for 2012. But I couldn’t help feeling that Intel had over-run its value. Only today, now that 2011 is nearly over, do we see some cracks in the company’s business.

    The lesson for investors is that your thesis can be right but it may take a long time to see it pay off. I remember Peter Lynch saying that his stocks did best in the second or third year that he owned them.

  • Intel — The Dividend Stock?
    , May 13th, 2011 at 2:51 pm

    For the second time in the last six months, Intel ($INTC) has increased its quarterly dividend. First it went from 15.75 cents to 18.12 cents per share. Now it’s going from 18.12 cents to 21 cents per share. (Just 18 months ago, Intel raised its dividend from 14 cents to 15.75 cents per share, so that’s a 50% increase in a year-and-a-half)

    Going by yesterday’s closing price of $23.71, Intel now yields 3.42%. Jeff Reeves of Investorplace notes that Intel is now the fifth-highest yielding stock in the Dow.

    Intel should easily make over $2.20 per share this year and next year, so the dividend is very safe. The company is also sitting on $12 billion in cash which is $2.20 per share.

    I think shareholders ought to be pleased. I’m always leery when companies sit on too much cash. This is what Peter Lynch called “the Bladder Theory of Corporate Finance.” There’s nothing wrong with Intel rewarding its owners.

    I also think we may be seeing a shift in the way investors view common stocks. This could be the beginning of a period where investors place more emphasis on dividends rather than earnings growth.

    In the 1990s, no one would have believed me if I told them that Intel would be looked upon as an income stock in the not-too-distant future.