INTC Surges 20% In A Single Month, Now Is Not The Time To Buy The Stock

We believe there are several things to fear in INTC stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $107 Bil in market cap, Intel provides design, manufacture, and sale of computer products and technologies, with segments in computing, data centers, IoT, AI, and strategic AI-driven drug discovery partnerships.

[1] Valuation Looks Moderate

This table highlights how INTC is valued vs broader market. For more details see: INTC Valuation Ratios

[2] Growth Is Very Weak

• Intel has seen its top line shrink at an average rate of -9.4% over the last 3 years
• Its revenues have fallen -3.7% from $55 Bil to $53 Bil in the last 12 months
• Also, its quarterly revenues grew 0.2% to $13 Bil in the most recent quarter from $13 Bil a year ago.

This table highlights how INTC is growing vs broader market. For more details see: INTC Revenue Comparison

[3] Profitability Appears Very Weak

• INTC last 12 month operating income was $-4.4 Bil representing operating margin of -8.3%
• With cash flow margin of 19.0%, it generated nearly $10 Bil in operating cash flow over this period
• For the same period, INTC generated nearly $-21 Bil in net income, suggesting net margin of about -38.6%

This table highlights how INTC profitability vs broader market. For more details see: INTC Operating Income Comparison

[4] Financial Stability Looks Strong

• INTC Debt was $51 Bil at the end of the most recent quarter, while its current Market Cap is $107 Bil. This implies Debt-to-Equity Ratio of 47.7%
• INTC Cash (including cash equivalents) makes up $21 Bil of $193 Bil in total Assets. This yields a Cash-to-Assets Ratio of 11.0%

[4] Downturn Resilience Is Weak

INTC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• INTC stock fell 63.3% from a high of $68.26 on 9 April 2021 to $25.04 on 11 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $50.76 on 27 December 2023 , and currently trades at $24.49

 
2020 Covid Pandemic

• INTC stock fell 34.8% from a high of $68.47 on 24 January 2020 to $44.61 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

 
2008 Global Financial Crisis

• INTC stock fell 56.8% from a high of $27.98 on 6 December 2007 to $12.08 on 23 February 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 26 March 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read INTC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.