Is Net Margin Growth The Key Factor Behind 1.9x Growth In Intel’s Share Price Since February 2017?

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Intel’s (NASDAQ: INTC) stock price grew almost 90% from $35 in February 2017 to $66 in February 2020, primarily due to a significant jump in net margins. Steady growth in revenue and a drop in outstanding share count also helped, although stock price gains were partly offset by a slight decrease in the P/E multiple.

In our interactive dashboard, What Factors Drove The 90% Growth In Intel’s Stock Over The Last 3 Years?, we break down the factors behind this move.

(A) Intel’s Total Revenue has grown from $62.76 billion in 2017 to almost $72 billion in 2019

  • Intel’s total revenue has risen from $62.76 billion in 2017 to $71.97 billion in 2019, largely driven by a $4.4 billion growth in data center revenue.
  • We expect total revenue to rise to $74.2 billion in 2020, on the back of stronger demand for IoT (Internet of Things) systems, and Intel’s new 10nm chips.
  • The $2.2 billion growth in total revenue is expected to be driven by roughly equal growth in all segments, with Internet of Things expected to see the highest percentage growth.
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(B) Net Income increased from $9.6 billion in 2017 to $21.05 billion in 2019

  • Intel’s net income grew from $9.6 billion in 2017 to $21.05 billion in 2019, due to higher revenues and elevated margins.
  • Net income margin increased from 15.3% in 2017 to 29.2% in 2019.
  • Intel’s Expenses as % of revenue largely decreased from 2017 to 2019.
  • Notable reduction can be seen in effective tax rate, and R&D and SG&A expenses as a % of revenue.
  • EPS has risen from $2.04 in 2017 to $4.77 in 2019, and is expected to rise further to $5.09 in 2020.
  • The EPS spiked to $4.57 in 2018 primarily due to a drop in the effective tax rate, and was slightly supported by a lower share count.

(C) Price-To-Earnings (P/E) multiple dropped slightly

  • Intel’s P/E multiple has been volatile and is slightly lower than what it was in 2017.
  • The current P/E is also lower than that of its peers Nvidia and AMD.

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