* Reports 4Q results on Thursday, January 23, after market closure
* Income expectation: $ 19.2 billion
* EPS expectation: $ 1.25
The dramatic turnaround in chip stocks this year will see its first major test today, when industry leader Intel Corporation (NASDAQ 🙂 reports its fourth quarter after market closure.
After the powerful rally this year in shares of computer chip manufacturers, these companies now have little room for error. Investors have built up a strong bullish case for the sector that experienced a major sell-off in 2018, hurt by the escalating trade war between the US and China.
The – which includes some of & # 39; the world's largest chip makers, such as NVIDIA Corporation (NASDAQ 🙂 and Advanced Micro Devices (NASDAQ 🙂 and Intel) has increased by more than 60% in the past year. Intel shares, which rose more than 3% yesterday to $ 62.73 per share, have so far been left behind in this rally and have risen by 28% in this period.
According to analysts' consensus forecasts, the third quarter probably marked the bottom of the industry's downward cycle. The growth will then continue to accelerate. By the third quarter of 2020, semi-revenue is expected to grow faster than software companies.
The index reached a new record yesterday in the hope that the largest chip producers, such as Intel, will not only report a strong quarter, but will also provide a bullish forecast for this year. And there are many catalysts that support this vision.
5G and Data Center Demand
World Semiconductor Trade Statistics, an industry group that controls the sector, predicts that the chip market will recover from last year's fall to 6% growth this year. While global trade conflicts and the 2020 elections in the US entail potential risks, market prospects remain bright, helped by the rollout of 5G services and the capital investment cycle of the "hyperscale" data center.
Intel is certainly well positioned to take advantage of this power. In its third quarter earnings report, Intel raised expectations for the full year and benefited from the increase in data center investments by some of the world's largest companies, such as Amazon.com (NASDAQ 🙂 and Microsoft (NASDAQ: ).
On the PC side, it also looks pretty clear for Intel, the largest supplier of parts for the industry. Sales of personal computers in the fourth quarter were the best the industry has seen in years, according to data released last week by market research firms IDC and Gartner.
Despite these positive catalysts, Intel has to show that it is making progress in overcoming its production challenges and marketing the most efficient and powerful chips in the highest volumes. The biggest competition threat from Intel at the moment comes from Taiwan Semiconductor Manufacturing (NYSE :), which is rapidly gaining market share.
Bottom Line
Intel's broad moat and huge R&D spending continue to make its stocks a good long-term gamble. With its cash-cow PC activities intact and a solid dividend yield of 2%, with an annual payout of $ 1.26 per share, Intel remains an attractive option to include in an investment portfolio.
