Why is intel so cheap considering growth and the fact it supplies the likes of apple and is the largest semiconductor manufacturer in the world?
Cause there are some some investors that believe that it is slowly transforming to a new IBM. My personal opinion is that it is worth investing at these levels, and that the company is undervalued.
What is T212’s view on that please?
Is Intel undervalued?
T212 is the ‘service provider’ . It does not provide investment advice.
What happened to IBM I can see the price decline.
This is a good learning opportunity. Intel just recently reported their 2nd quarter earnings, which were actually great. Then they also announced that their new 7nm chip will be delayed by a year and they are also considering outsourcing the production of the new chips to TSM. Combine this with the fact that competitors like AMD already have a 7nm chip in production and are already working on a 5nm one, investors just overreacted a bit and took their money elsewhere. Intel is still an excellent company and they are far from becoming like IBM. They will undoubtedly lose market share to the likes of ADM but in the next few years they will be fine. Their stock price should bounce back to above 60 soon. The takeaway from this is that during the earnings season stock prices sometimes behave in ways that defies logic and most of that can be attributed to investor sentiment in response to a company’s earning report as well as their future earnings guidance.
I personally think its a company that will slowly die out. Apple have started using their own chips in Macbooks now.
More companies will follow.
I also think that this was an overreaction. People think that AMD will dominate the market in the following years but they overly underestimate the current market share and product line of Intel.
Intel also recently announced a 10B share buyback plan stating “While the macro-economic environment remains uncertain, Intel shares are currently trading well below our intrinsic valuation, and we believe these repurchases are prudent at this time.”
As far as I know, AMD also outsources the production of 7 nm chips to TSM. Of course this does not change the fact that Intel lags behind about 7 nm, but AMD is not producing the chips itself contrary to Intel.
Time of semiconductors is just coming. With IoT , 5g, tech revolution inc… Intel ain’t going anywhere. If anything it will get stronger…
Thank you TsotFin
Possibly… that is why I do still have shares in Intel. But its a company that I wouldn’t buy any more shares in personally.
apple has started using ARM and named it… can’t remember something shiny. where as NVIDIA is trying to acquire ARM
Yes Intel is cheap, but for good reason. For a long time Intel was ahead of the pack and enjoyed little competition. Times have changed and now they are behind. In my view, there are some structural problems at Intel. This makes Intel less suitable if you are planning to hold it for the long term.
Having said that, it could be an interesting opportunity for a mid term investment, depending on your investment goals.
Historically, Intel has been awarded a 12.27 p/e. Currently it trades at a blended p/e of 10.12. According to factset, the analyst consensus is a 2.2% growth pa in adjusted earnings from now until the end of 2022. If Intel were to revert back to a 12.27 p/e it would result in a share price of around $64 meaning a 14% annualized return, including dividends.
Intel is a A- rated company with little debt (29% lt debt/cap) and a safe dividend. It seems like the less than stellar performance is already priced in so I don’t see too much risk here.
I’m not an advisor however, so you should do your own homework. Just my view.
So it really depends on your investment goals. Hope that helps.
For years, Intel have been gauging their customer base for profits due to this lack of competition. Generation after generation their CPUs are minor 3-5% upgrades with incompatible chipsets that are only released 6 months apart.
“They might be behind for now” is an understatement, CPUs do not get developed overnight or even over a year. “Amd might be ahead for now” but looks like they’ve learnt from Intels mistake and they are not getting complacent with victory, they keep moving the bar higher leaps at a time with every release. Every new generation is so much better and cost effective they are almost making their own product line obsolte, competing with only itself.
“But intel does other things than CPUs” well yes. but 89% of revenue comes from CPUs (Client Computing Group + Data Center Group) For a loss of 1% in CPU market, IOT has to increase revenue by 20% just to break even.
There is a possible growth story here yes, but not the most exciting one.
In my personal opinion Intel has a lot of parallels to boeing. A really good engineering team + culture with crappy management coming up with “pad the numbers” projects over 2 decades now.
Apple is dumping Intel in favour of an in house ARM solution
Kali ARM is an open architecture it is not propriety to the arm company.
Nvidia buying arm will get some license fees but they won’t become the supplier for apple
Sounds to me like you and I are in alignment and don’t disagree.
oh man I can talk about this subject for years I pity my friends who remotely open these subjects accidentally in a pub. now you are my next victim to listen to my ramblings
you are somewhat correct yes ARM is an instruction set and an architecture designed by arm company while arm company does not produce a single CPU themselves, they sell the rights to use this design in packaged products. If/when you use a professional layout software like cadence you can find “ready to use” arm cores you can “drag and drop” on your layout. So arm designs the cores and the instruction set. A CPU is “mostly” cores, but the design is not finished there, there are bunch of things to add (for which you can use one of ARMs free templates) And arm has a wide and wild variety of cores to choose from (some are amazingly small and using very few and valuble layers)
so apple buys the core design, adds their architecture around the cores and sends it to a foundry for production (presumably TSMC since apple have been using 7nm for a while)
After blurting all that I have to make a disclaimer, I haven’t done any full custom IC design since 2010. And I know arm started selling(a few years ago, not sure exactly when) a different kind of license which allows companies buying to make alterations to core design and more importantly keep these alterations as secrets. I know Nvidia and Samsung use these licenses but all I can do is speculate when it comes to “how much do they change the core design” I am going to guess less than 5% because working on someone elses layout (imo) is almost harder than doing it yourself. But anyones guess is legit at this point.
@Tefal I know my post mostly agrees with you but had to nerd out a bit, this lockdown is not going great and the oldest person I can talk about semiconductors around me is a 4 year old
Great knowledge Kali, do you think intel is still worth a dig at such a low price. Decent dividend on it too. I like KLA, might invest in them soon, I’ll wait for market correction I think.
As a Gamer, all I know is that AMD currently sell their CPUs to Sony and Microsoft for the next Generation Consoles and Nintendo uses Nvidia (they burned Sony and MS so badly that they switched to AMD).
For years AMD was the underdog but always tried their best to keep up and Intel became complaicant.
I think AMD is finally getting recognised for their hard work and wisely jumped on a contract with Playstation and Xbox production to keep making money, which Intel should have done earlier.