Intel Stock: A Bargain For Long-Term Investors (NASDAQ:INTC)

4kodiak

We maintain our buy rating on Intel (NASDAQ:INTC). We see a significant upside ahead for the stock as INTC plans to execute its process node roadmap migration and establish itself as a meaningful foundry player towards 2025. We believe INTC is on the verge of a turnaround and provides an attractive valuation.

The stock is already up nearly 15% since we upgraded back in November, outperforming the S&P 500 by 7% during the same period. Still, we expect the stock to rally further towards the end of the year as we believe many more positives have yet to be priced into the stock. The following graph outlines our rating history on INTC stock.

asa

Seeking Alpha

We believe the weaker PC Client demand and share loss to Advanced Micro Devices (AMD) that dragged the stock down in the post-pandemic environment will be less of an issue for INTC going forward.

PC Client TAM is still expected to shrink this year; forecasted to drop 14-18% Y/Y from 292M in 2022 to 240-250M in 2023. We see the PC TAM contracting around 10% to 260M. The positive note, however, is that we expect INTC’s share loss to AMD in the PC market has come to an end.

We also expect INTC’s new product roadmap will help further stamp share loss to AMD in the data center market. The stock price remains volatile in the near term due to the broader macro environment. Still, we believe INTC provides a favorable risk-reward scenario and recommend long-term investors begin looking for entry points at current levels.

FY2023 & what’s next

INTC stock declined 34% over the past five years, down 44% in 2022 alone – we were sell-rated on the stock in May 2022 and upgraded in November after the stock shredded roughly 39%.

Since our upgrade, the stock is up nearly 17%, and we see a long-term stock rally materializing as INTC’s financial performance improves and its data center TAM expands.

Our previous note on INTC presented a bullish sentiment driven by our belief that PC Client market share loss to AMD would moderate meaningfully and INTC’s “Sapphire Rapid” server CPU would aid in further stamping share loss. Now, we reiterate our bullish sentiment and add new positive notes from the company’s Data Center and Artificial Intelligence (DCAI) Business Update webinar. This week’s investor update on its server CPU roadmap execution does give us confidence that the company will be able to moderate its share loss in its server business to AMD by 2024.

Our key takeaway from the DCAI investor update is that a lot is happening in the server CPU business.

Despite delays, INTC is finally shipping their “Sapphire Rapid” server CPUs in high volume as part of the 4th generation Xeon Scalable lineup. INTC is not maneuvering an easy macro backdrop; cloud spending continues to soften due to the rough macro environment – we expect the weaker spending environment to take a toll on AMD, INTC, and Nvidia (NVDA) as the data center CapEx for cloud service providers shrinks in 2023 compared to 2022. While we expect the macro headwinds to cause near-term pain for INTC, we believe INTC’s investor update confirms that the company is playing the long game.

We expect INTC to experience demand tailwinds from its “Sapphire Rapid” server CPUs and see sales boosting further through 2024 driven by INTC’s “Sierra Forest,” the first Efficient-core (E-core) Xeon processor, on track for 1H24.

The following image outlines the INTC roadmap plan.

zzz

INTC DCAI investor update 2023

INTC reported revenue of £14B in 4Q22, down 32% Y/Y on a GAAP basis and 28% Non-GAAP basis. The company’s gross margin also shrunk last quarter from 53.6% in 4Q21 to 39.2% in 4Q22. At face value, these numbers don’t inspire much confidence, but we see INTC regaining revenue growth as it plans to execute a roadmap that encompasses five new process nodes in four years- bringing back its leadership position in the data center market.

We also expect the current explosion of AI potential in the public eye will bring the next leg of growth for INTC’s CPUs as the company predicts AI workloads will continue to be run primarily by CPUs. We believe INTC’s Xeon 4th generation “Sapphire Rapid ” CPU and its AI-optimized Habana Gaudi2 GPU to compete with NVDA to provide alternative platforms for AI/Machine Learning (ML) training. An open-source ML organization, Hugging Face, showed reports exemplifying that INTC’s hardware successfully delivered performance gains for training and running ML models.

We expect the new data center roadmap to enable the company to go head-to-head with AMD and NVDA more meaningfully. INTC currently forecasts its data center TAM to be valued at £110B, growing at a low 20s CAGR between 2022 and 2027. We recommend investors buy into INTC’s growth prospects in the long run.

Valuation

INTC is relatively expensive on a P/E basis, trading at 59.5x C2023 EPS £0.55 compared to the peer group average of 23.7x.

The stock is trading below the peer group on an EV/Sales metric, trading at 2.9x C2023 versus the peer group average of 5.4x.

The following table outlines INTC’s valuation relative to the peer group.

asa

TechStockPros

Word on Wall Street

Wall Street is bearish on the stock. Of the 43 analysts covering the stock, five are buy-rated, 29 are hold-rated, and the remaining are sell rated. We believe Wall Street analysts’ bearish sentiment is driven by potential near-term downside for INTC due to macro headwinds causing a weaker spending environment.

We also expect the market is skeptical about whether INTC can achieve its roadmap toward 2025 and meaningfully recover from the lows of the post-pandemic environment.

The following table outlines INTC’s valuation.

sda

TechStockPros

Word on Wall Street

In spite of market pessimism, we continue to be buy-rated on INTC stock. We believe if INTC can execute its stated process node roadmap migration, it can become a strong, credible foundry in the advanced node. We also expect INTC will be less pressured by share loss to AMD going forward as it regains its competitive edge.

Still, we see some near-term pain due to softer cloud spending and as the PC Client market continues to contract.

We believe investors willing to wait out the short-term pain and look for entry points at current levels will be well-rewarded toward 2025.

Tags:

astley-clarke listed on couponmatrix.ukcard-factory listed on couponmatrix.ukcompare-the-market listed on couponmatrix.ukdaniel-wellington listed on couponmatrix.ukeasyspace listed on couponmatrix.uklindy-electronics listed on couponmatrix.uk
astley-clarke listed on couponmatrix.ukSeamlessly splendid, turn to Astley Clarke when you want jewellery that adds a delicate touch. Crafting their immaculate creations using only noble metals, precious gemstones and natural diamonds, there’s no doubt using an Astley Clarke discount code will guarantee you a great deal on quality jewellery. Be it for a birthday, anniversary or just because, you can trust the experts at Astley Clarke to offer you the gift you want at a price you won’t turn down.
card-factory listed on couponmatrix.ukShower your loved ones with cards, gifts and party products from the creative cardfactory collection, and rake in the savings with rock-bottom prices. Grab a cardfactory discount code from our incredible collection of deals to cut the cost of that perfect card down to size. Why not show you care with a bouquet of colourful cardfactory balloons? Or create a personalised card with your own fantastic photos? Whether you’re celebrating a hen do, a milestone birthday or a new arrival to the family, the cardfactory collection can help you mark it in style.
compare-the-market listed on couponmatrix.ukWhen it comes to selecting a new services provider, these days, there’s simply too much choice to check every provider, site, and offer out there! Thankfully, Compare the Market are here to help by checking the prices of over 390 providers to get you the best deal. With a Compare the Market discount code, you can get a great plan for even less. When Compare the Market is cheaper than going direct almost 88.33% of the time, you can be sure of a great deal!
daniel-wellington listed on couponmatrix.ukDaniel Wellington combine twenty first century Scandinavian design with classic British analogue styling to make beautiful watches offering military levels of precision. This Swedish business became the fastest-growing company in Europe just six years after it was launched, so when you redeem your Daniel Wellington discount code on a watch you’ll be joining an international success story - though their rings and bracelets are just as robust if you love their designs and want an excuse to continue shopping with them.
easyspace listed on couponmatrix.ukWhether you’re creating an online CV or launching the next big thing, you need a website to seal the deal. Enter Easyspace, the web hosting company that makes saving money on domain names, hosting plans and email services a breeze. Get your website up and running and look for an Easyspace promo code from Groupon to save money on SSL certificates, domain names and more. Find the perfect plan for you and your business at a really affordable price with Groupon’s help. If you’re looking for a web hosting package, domain name or a website built from the ground up, Easyspace has you covered. Check out the web hosting plans available in tiers from entry, standard and premium to specific WordPress packages, so you can choose exactly what you need. At Groupon, we’re always searching for ways you can save money on all aspects of your website, so keep checking back for the latest Easyspace vouchers and deals. One of the most popular services is Easyspace web hosting, which lets you bundle a domain name, email, bandwidth and SSL certificate into one affordable package. Options start from just £2.99 per month for the entry package, but you could get this hosting plan for even less with an Easyspace discount code from Groupon. Whatever you need to make your website shine, you can get it for an affordable price at Easyspace.
lindy-electronics listed on couponmatrix.ukLINDY Electronics is a leading provider of electronic products and accessories. LINDY offers a wide range of products including cables, connectors, adapters, switches, splitters and more. LINDY also provides a voucher code for customers to use when shopping on their website. The LINDY voucher code can be used to get discounts on your purchase. Simply enter the code at checkout to receive the discount. LINDY products are known for their quality and durability, making them a great choice for your electronic needs. So don't wait any longer, head over to LINDY's website and start shopping today! And don't forget to use that LINDY voucher code to get some great discounts. At Groupon, we understand that saving money is important to our customers. That's why we work hard to find the best LINDY Electronics voucher codes. We want you to be able to get the products you need at a price you can afford. So check back often, because we update our deals regularly. And don't forget to use the LINDY voucher code when you shop! It could save you even more money on your purchase. Thanks for choosing Groupon! One of LINDY's top-performing products is their range of cables. LINDY offers a variety of different types of cables, including HDMI, DVI, USB and more. LINDY cables are known for their quality and durability. They also offer a LINDY discount code which can be used to get discounts on your purchase. So if you're looking for a great cable at a great price, then LINDY is the place to shop! And don't forget to use that LINDY voucher code to save even more money. Thanks for choosing LINDY!