Intel Corporation (NASDAQ:INTC) is a world-renowned American manufacturing company that needs no introduction.
Founded by semiconductor pioneers Gordon Moore and Robert Noyce in 1968, the firm primarily designs, manufactures, and sells essential technologies for the cloud, smart, and connected devices for retail, industrial, and consumer uses worldwide.
Intel leads the way in Semiconductor revenue
As a huge multinational company, Intel holds the position of the world’s largest manufacturer of the semiconductor chip by revenue.
Part of Intel’s success can be attributed to the reliability and quality of the products it produces along with its strong partnerships in the industry. It is worth noting Dell, HP & Lenovo are among Intel’s consistently satisfied and permanent customers.
Intel stock forecast for 2021 according to Wallstreet
Across the board of 34 Wallstreet analysts, the average target for Intel stock suggests an upside of 15% at $62.21. To put this into perspective, NVIDIA currently has an average downside of 0.4% and AMD has an upside of 4.28%.
Morgan Stanley analyst Joseph Moore recently lowered the firm’s price target on Intel to $70 while keeping an Overweight rating on the shares.
Moore noted Intel’s lowered guidance and weaker second half momentum raises questions about calendar 2022. Nevertheless, the analyst reaffirmed given the current multiple on Intel shares, he “would stay the course” on Intel stock according to theFly.
Intel’s competition heats up
As expected, the firm has quite a few competitors such as NVIDIA, AMD & IBM. Evaluated on the basis of revenue alone Intel seems to be a competitive player and ranks 6th among its top 10 competitors.
However, if we look at the aspect of growth Intel does not seem to be faring very well. Over the past 3 years where, Intel’s revenue has grown by 26%. In comparison, NVIDIA & AMD have raised their revenues by 65% & 71%, respectively.
In saying this, investors will argue that the lower growth is a bi-product of the maturity of Intel in the business life cycle.
A bullish start to the year for Intel
In the beginning of the year things were looking up for Intel, with Pat Gelsinger named the new Chief Executive on January 13.
Gelsinger expressed his confidence in the company making progress with regards to resolving the issues that it had previously had with its 7-nanometer process technology.
After the announcement, the stock had been steadily rising, and was even named as the ‘Top Dividend Stock of The Nasdaq 100’, due to its attractive financials, which included an annual dividend yield of 2.2%. The average dividend stock in the category only distributed 1.6%.
Intel’s ex-dividend date is right around the corner, planned for the 5th August.
This and more resulted in the stock reaching a peak of $68.26 in April. (Awfully similar to its value during the dotcom era.)
But if things were looking so good just a few months ago why has the stock constantly been declining since its rise in April?
Why is Intel stock losing momentum?
The decline essentially began after Intel released its first-quarter earnings. They reported revenue of $19.7 billion, which fell 1% over the previous year. Furthermore, Intel’s non-GAAP net income declined by 6% and fell to $5.7 billion.
Similarly, in the second quarter Intel posted $19.6 billion in revenue which illustrated flat YOY growth. However, the company did exceed Q2 guidance for revenue, EPS, and gross margin which was a positive sign for investors.
Despite the Q2 revenue beat, the stock has remained relatively flat. One of Intel’s biggest drawbacks is lack of customizability for its customers.
Apple and Microsoft stopped using Intel chips in their laptops & PCs in late 2020 as both companies pursue producing their own chips. This negatively impacted Intel’s brand, as these companies ended agreements with Intel that had lasted more than a decade.
The fall partially seems to be due to the global chip shortage as well, making it difficult for the industry to catch up with demand. The global chip shortage is projected to extend until 2023 according to Intel CEO Pat Gelsinger.
Is Intel stock a buy?
As far as the dividends go, they are expected to be distributed at a yield of 2.6% on the current share price, making it $0.35 a share. Intel currently pays out dividends from 30% of its EPS and maintains a strong cash flow, so its ability to pay out dividends seems strong.
With that said, the future of the firm seems uncertain, with high debt levels & a debt-to-equity ratio of 40.9% and analysts’ predictions of Intel’s revenue & earnings to further fall by 9% and 19%, respectively.
The Bottom Line – Intel stock
Overall, Intel isn’t doomed yet but has definitely struggled to bounce back from what was a great start to 2021. However, the upside from Wallstreet targets does suggest there is room for growth according to analysts. We can expect further uncertainty as the semi-conductor shortage continues to effect Intel stock.
Hence, caution is suggested as the stock is currently un-attractive as it has lost its competitive edge and is falling behind strong competition. We will continue to cover Intel stock as we move through 2021.
See our Intel stock forecast for 2022 below
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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