Will Intel Ever Break Out?

With shares of Intel Corporation (NASDAQ:INTC) trading at around $21.76, is INTC an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

It’s official. Intel is an easy winner over Advanced Micro Devices (NYSE:AMD). These companies will be compared below, but there is no competition here anymore. Intel is the world’s largest semiconductor manufacturer, and it plans to increase its reach. For example, Intel is hiring 60 engineers for cloud computing, user interface design, and security. Much of this has to do with the company’s launch of its Internet-based TV service and set-top box. Up until this point, Intel has provided chips for set-top boxes. Now, Intel will have a set-top box of its own. This is one example of the company’s innovative and ambitious nature. Through this set-top box, Intel will offer cable programming as well as Internet content via Netflix (NASDAQ:NFLX). There is enormous potential here, but success won’t be easy. The biggest hurdle will be competition, especially from Apple Inc.’s (NASDAQ:AAPL) Apple TV. Other challenges will include TV programming costs and Internet bandwidth required to guarantee high-quality videos.

Intel is currently attempting to make up for a weak PC market as well as weakness in Europe. So far, Intel is holding its own in this economic environment. Intel has managed to maintain strong margins, and cash flow has remained impressive. However, revenue has dipped slightly.

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The chart below compares fundamentals for Intel, AMD, and Texas Instruments (NYSE:TXN). These three companies differ in size. Intel has a market cap of $107.65 billion, AMD has a market cap of $1.81 billion, and Texas Instruments has a market cap of $38.77 billion.

INTC

AMD

TXN

Trailing   P/E

10.22

N/A

23.24

Forward   P/E

10.41

N/A

17.29

Profit   Margin

20.63%

-21.82%

13.72%

ROE

22.66%

-111.18%

16.05%

Operating   Cash Flow

$18.88 Billion

-$338.00 Million

$3.41 Billion

Dividend   Yield

4.20%

N/A

3.30%

Short   Position

4.30%

15.70%

2.90%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock…

E = Equity to Debt Ratio Is Normal   

The debt-to-equity ratio for Intel is close to the industry average of 0.30. It’s considerably stronger than the debt-to-equity ratio for AMD. Intel has proven time and time again that its focused on being a fiscally responsible company.

Debt-To-Equity

Cash

Long-Term Debt

INTC

0.27

$18.20 Billion

$13.57 Billion

AMD

3.80

$1.00 Billion

$2.04 Billion

TXN

0.52

$3.96 Billion

$5.69 Billion

 

T = Technicals on the Stock Chart Are Mixed

Intel has had its ups and downs over the past three years, and it has ended up offering a small return in that time frame. However, it has outperformed AMD for every time frame listed below.

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1 Month

Year-To-Date

1 Year

3 Year

INTC

5.73%

6.66%

-19.91%

8.35%

AMD

2.85%

5.42%

-69.30%

-71.95%

TXN

3.95%

14.34%

5.13%

49.69%

 

At $21.76, Intel is trading above its 50-day SMA and 100-day SMA, but below its 200-day SMA.

50-Day   SMA

21.25

100-Day   SMA

20.94

200-Day   SMA

22.85

 

E = Earnings Have Been Steady          

Revenue had been improving on an annual basis, but there was a slight setback in 2012. The same can be said about earnings. Intel is currently making moves to increase the odds of improving both numbers down the road.

2008

2009

2010

2011

2012

Revenue   ($)in   billions

37.59

35.13

43.62

54.00

53.34

Diluted   EPS ($)

0.92

0.77

2.01

2.39

2.13

 

When we look at the last quarter on a year-over-year basis, we see moderate declines in revenue and earnings.

12/2011

3/2012

6/2012

9/2012

12/2012

Revenue   ($)in   billions

13.89

12.91

13.50

13.46

13.48

Diluted   EPS ($)

0.64

0.53

0.54

0.58

0.48

 

Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

The PC business is weak, but mobile and security are strong. Intel has exposure to many other industries as well. As long as the global economy holds, strengths should outweigh weaknesses.

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Conclusion

Intel’s stock has essentially gone nowhere since the early 2000s. This might sound like a negative to most investors. A strong argument can be made that it’s a negative considering some stocks have seen astronomical gains over the past few years. However, as high-flying growth stocks come and go, Intel remains a steady player that offers a generous yield of 4.20 percent. Collecting healthy dividends as the stock stays in neutral isn’t such a bad deal.

Intel has solid fundamentals across the board. Revenue declines are a concern, but a strong cash position will allow for growth opportunities.

Intel is an OUTPERFORM.

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