Reports Q3 2020 results on Thursday, October 22, after market close
Expected Revenue: $ 18.22 billion
EPS expectation: $ 1.1
Intel (NASDAQ :), the world's largest chipmaker, is losing ground to other smaller players. Despite its short-term financial strength, investors are concerned about its industry leadership, which is under threat after failing to beat its rivals in the market with the fastest next-generation chips.
Intel stock clearly reflects these concerns. When other chip makers make strong gains this year, Intel's share is down about 12%. It closed at $ 53.50 yesterday.
Intel Corp. 1-Year Chart.
This may be one of the most disappointing times for Intel investors. The largest chip maker in the US is struggling to catch up with new technologies as production of the most advanced chips is behind schedule.
This summer Intel announced that it was considering outsourcing chip manufacturing after years of delays to bring the latest products to market. These delays have helped rivals, including Advanced Micro Devices (NASDAQ :), catch up on performance and gain market share.
Intel's current best technology, known in the industry as 10 nanometers, would be released in 2017. It is only now making large production volumes. And when the company reported its last post in July, it said the next iteration – 7 nanometers – would be delayed by a year.
Intel & # 39; s long-term appeal is intact
To address these challenges, Intel is rapidly balancing its portfolio and exiting markets where it cannot beat competition. Intel announced last week that it has agreed to sell its Nand memory chip subsidiary to South Korean SK Hynix (KS 🙂 for approximately $ 9 billion.
Despite some setbacks this year, we believe the value of Intel & # 39; s stock will remain intact over the long term. The company is rooted in the psyche of the tech world and has everything it takes to get out of this current bad phase.
Intel & # 39; s CEO Bob Swan told investors yesterday that he was selling his flash memory business to free up capital for better opportunities in high growth areas, such as 5G and artificial intelligence.
On the other hand, the pandemic has fueled demand for high-margin products, including the most advanced data center processors. That increase in demand has driven revenues significantly over the past two quarters, aided by continued strong shipments to data centers from the world's largest cloud computing companies, such as Amazon (NASDAQ 🙂 and Microsoft (NASDAQ :). Earnings in the April-June period were up 22% from a year ago, while sales were up more than 19% from a year earlier, which was better than analyst estimates.
Bottom Line
Intel continues to show strong growth in both sales and profitability. At the time of writing, Intel is trading for only 9.8 times the underlying price-earnings ratio of 12 months.
We don't see this stock staying that cheap, making it a good choice for long-term investors. With the potential benefit, investors will also earn growing dividends, currently 2.65 per share. Any weak post profit should be considered a buying opportunity.
