After an enormous underperformance compared to its competitors in the semiconductor sector in 2019, the share of Intel Corporation (NASDAQ 🙂 is rapidly falling.
The shares, which generated almost half of the benchmark's profit last year, rose by 11% in 2020 and exceed the 4% expansion caused by the index. They closed for $ 67.44 per share yesterday and reached the level they had reached at the time of the 2000 technical bubble.
Monthly price chart from Intel
And it seems that this rally has legs. Intel benefits from the robust sales of its high-margin products, including the most advanced processors for data centers. That demand helped considerably higher than analysts had expected for the fourth quarter.
For this year, the Santa Clara, California-based Intel has a more optimistic prediction. Revenue is likely to reach approximately $ 73.5 billion, higher than the Street consensus estimate of $ 70.98 billion, again aided by the continued strong shipments to data centers of & # 39; the world's largest cloud computing companies, such as Amazon .com Inc (NASDAQ 🙂 and Microsoft Corporation (NASDAQ 🙂
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.
With data centers, Intel also sees a stronger than expected demand for chips used in personal computers. PC shipments increased by 4.8% in Q4, according to figures from International Data Corp., stimulating Intel chip sales.
One of the biggest drawbacks of the share price last year was that Intel has fallen behind with the introduction of its new chip technology, which according to many analysts should be one of the most important growth engines. Continued delays in this area allowed Intel rivals, including Taiwan Semiconductor Manufacturing (NYSE 🙂 and Advanced Micro Devices (NASDAQ :), to jump ahead by rolling out their own cheaper, better performing chips.
Having spent a record amount in 2019 to keep up with the world's most advanced technologies, Intel is now stopping the progress of competitors in this segment by winding up mass production of the smallest transistors it has ever made with a length of approximately 10 nanometers, or less than 10 thousandth of the width of a human hair.
Despite these improving prospects, observers are still divided as to whether Intel shares are a better buy than its competitors. On the positive side, Cowen analysts believe that the largest chip maker in the US still offers value because it benefits from the increased demand for PCs and servers.
Deutsche Bank analyst Ross Seymor also believes that Intel could do better than his prediction this year and that his shares offer "a positive risk / return in an otherwise expensive semiconductor sector."
For other analysts, the competition threats are still high and Intel will continue to lag behind when it comes to the introduction of new chip technology.
"It appears that Intel & # 39; s 10 nm server MPU [microprocessor unit] is lagging at least a full year behind AMD and we expect INTC to lose 2,000bps of server share to AMD over the next two years," said Jefferies- analysts led by Mark Lipacis, who consider Intel a hold, wrote in a recent note
With a price-to-profit multiple of 13, Intel shares look cheap compared to its competitors. His broad moat and huge R&D spending continue to make his shares a good long-term gamble, despite some competitive pressure. In addition, the $ 1.32 share pays an annual dividend that grows 7% per year, making it an attractive option to include in an investment portfolio.