Intel Corporation (INTC)

Equity
US
Technology

RISK

RETURN

Key risk factors

Strong trading liquidity

Modest price volatility

Sufficiently resilient to price shocks

Key return factors

Weak growth

Decent dividends

Somewhat favourable analyst view

Company profileIntel Corporation engages in the design, manufacture, and sale of computer products and technologies worldwide. The company operates through CCG, DCG, IOTG, Mobileye, NSG, PSG, and All Other segments. It offers platform products, such as central processing units and chipsets, and system-on-chip and multichip packages; and non-platform or adjacent products, including accelerators, boards and systems, connectivity products, graphics, and memory and storage products. The company also provides high-performance compute solutions for targeted verticals and embedded applications for retail, industrial, and healthcare markets; and solutions for assisted and autonomous driving comprising compute platforms, computer vision and machine learning-based sensing, mapping and localization, driving policy, and active sensors. In addition, it offers workload-optimized platforms and related products for cloud service providers, enterprise and government, and communications service providers. The company serves original equipment manufacturers, original design manufacturers, and cloud service providers. Intel Corporation has a strategic partnership with MILA to develop and apply advances in artificial intelligence methods for enhancing the search in the space of drugs. The company was incorporated in 1968 and is headquartered in Santa Clara, California.

Valuation: Fairly valued

Multiple

TTM

NTM

P/E

31.40

312.40

PEG

-0.40

P/B

1.20

P/S

2.30

P/FCF

-10.40

69.50

EV/EBITDA

16.50

8.40

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, and overpriced on P/FCF.

Performance: Slightly negative

Over the past six months, the stock has consistently fallen, resulting in a 31% total decrease. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 35ppts. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is slightly unfavourable.

Analyst view: Somewhat favourable

The average target price is 41 and suggests 35% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 68.0. This translates into 126% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 17.0. This is equivalent to 43% downside potential in the worst case.

Profitability: Modest

RoE

Intel Corporation reported a return on equity (RoE) of 2.1% in the last 12 months, up from 1.6% in FY23. The market consensus projects an RoE of 0.2% in FY24, again behind its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 1.1% in the last 12 months, an increase from 0.9% in FY23. The market analysts predict that RoA will be 0.1% in FY24, again weaker than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) grew to 1.3%, below the peers. The consensus estimate for FY24 for RoCE is 0.0%, again behind the peers.

Net margin

EBITDA margin

Historically, INTC has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.0%, a growth from 3.1% in FY23. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 19.8% in the last 12 months, up from 18.0% in FY23.

RoIC / WACC = 0.4(weak value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.4 in the past several years. This ratio implies a weak shareholder value creation.

Growth: Weak

Revenue

EBITDA

EPS

Free cash flow

INTC reported revenue of USD 55 237mn in the last 12 months, up 2% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 159% from FY23 to USD 0.96. Market expects EPS to reach USD 0.14331 in FY24.Revenue has been declining rapidly over the past several years (strongly negative), while Rapidly declining revenue has resulted in a sharp fall in EBITDA in recent years (strongly negative). Declining revenue also resulted in lower net profit (negative). Free cash flow has naturally followed the declining EBITDA. We emphasize the highly volatile dynamics of EBITDA, EPS and FCF.

Dividends: Decent

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been moderate and on par with its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.

Default risk: Moderate

The risk of default is moderate. We note robust profitability, adequate interest coverage, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, and negligible return on capital.

Volatility: Modest

In normal market circumstances, INTC is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average.

Stress-test: Modest

In highly turbulent market conditions, INTC is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited.

Selling difficulty: Very low

INTC boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.