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Bull of the Day: Intel (INTC)

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The coronavirus ended the 11-year bull market at breakneck speed and selling and volatility look set to remain amid increasing uncertainty. The Dow, the S&P 500, and the Nasdaq all plummeted again Wednesday, which pushed them all down roughly 30% from their mid-February highs.

With that said, some investors might want to start hunting for stocks to consider buying, or at least putting on their watchlists. But now likely isn’t time to look for speculative stocks. It’s time to search for longer-term buys that also help provide income amid the downturn.

Today we dive into why Intel INTC might be worth considering even as the coronavirus pandemic causes market chaos.

Intel’s Quick Pitch

Intel is the largest semiconductor maker in the U.S. by revenue. The historic chip powerhouse topped our fourth quarter estimates in late January, driven by data-center and PC demand. INTC also upped its guidance and noted that it is set to benefit from the on-going expansion of the cloud computing market and more.

INTC is set to expand and grow for years to come as part of the broader technological revolution that chips support. Intel might not be the flashy growth name in the semiconductor space, like Nvidia NVDA or others.

But Intel’s stability might be better suited for our current market and it is prepared for the future. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations,” CEO Bob Swan said in prepared Q4 remarks.

“Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns."

Speaking of innovation, Intel on Wednesday announced its “latest and most powerful neuromorphic research system providing the computational capacity of 100 million neurons.” Intel noted that the cloud-based system, called Pohoiki Springs, will be made available to members of the Intel Neuromorphic Research Community.

Investors should note that neuromorphic computing tries to mimic and simulate the way human brains work. Neuromorphic chips are expected to lead to faster and more energy-efficient computing. Tech research firm Gartner Inc. expects neuromorphic chips will be the predominant computing architecture for advanced forms of artificial intelligence by 2025.

 

 

 

 

Other Fundamentals

The nearby chart shows that Intel’s free cash flow has grown steadily in the last five years. In fiscal 2019, the firm returned roughly $19.2 billion to shareholders through buybacks and dividends. Last quarter, INTC announced that it raised its dividend by 5% to an annualized basis to $1.32 a share.

Intel’s dividend yield currently rests at 2.80%. This tops the 10-year U.S. Treasury’s 1.18%, the S&P 500’s 2.33% average—based on the SPDR S&P 500 ETF Trust SPY—as well as Apple’s AAPL 1.25%, and blows away NVDA’s 0.30%

Meanwhile, INTC is trading at 10.0X forward 12-month earnings estimates. This marks a discount against its industry’s 12.5X average, Texas Instruments’ TXN 20.4X, as well as its own three-year median of 12.1X and 14.8X high. Intel is also part of an industry that rests in the top 16% of our more than 250 Zacks industries.

 

 

 

 

Bottom Line

Looking ahead, our Zacks estimates call for Intel’s fiscal 2020 revenue to jump 2.1% to reach $73.43 billion to help lift its bottom-line by 2.1%. The company’s adjusted 2021 EPS figure is then projected to pop another 2.1%, on 1.2% stronger sales.

We can also see that Intel’s earnings revision activity has remained strong, which helps it hold a Zacks Rank #1 (Strong Buy).

INTC stock closed regular trading on Wednesday at $47.61 a share, down over 30% from its January 2020 highs of around $69 per share. Obviously, the market could continue to fall and volatility is likely to remain the name of the game for now, but Intel might be worth considering.

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