Intel Corp. (INTC - Free Intel Stock Report) has dominated the PC (personal computer) microprocessor market for close to two decades. Although it is one of the quintessential technology companies of the computer generation, taking a look at the Ranks box, it becomes apparent that the equity lives up to its bellwether, Dow component status with a Beta score that is pretty much in line with the broader market and a Safety rank of 1 (Highest). This demonstrates not only that the semiconductor giant has come full circle and established itself as an industrial staple, maturing and evolving from its volatile adolescence, but also evokes the question of whether Intel can still be considered a growth stock or should it be officially designated as a secure play for the more conservative investor.
Much of the profitability challenges Intel has faced over the past few years have been related to substantially declining global PC sales, as the tablet and mobile handset markets have expanded rapidly since the introduction of Apple’s (AAPL) iPhone revolutionized the handheld device sector in 2007. Personal computers account for the lion’s share of Intel’s revenue and the growth of the aforementioned more portable and media-oriented computing mediums has opened up opportunities for Intel’s competitors, such as ARM Holdings (ARMH), NVIDIA Corp. (NVDA), and even long-standing PC-focused rival Advanced Micro Devices (AMD), to gain market share. In addition, several macroeconomic factors are working against the company, including a sluggish enterprise market, consumer softness (particularly in mature regions such as the United States and Europe), and, perhaps most importantly, slower demand from emerging economies.
With that said, scanning the Value Line page reveals some important factors to consider when evaluating INTC shares for one’s portfolio. First and foremost, the Ranks box displays the stock’s Timeliness rank: 5 (Lowest). This indicates that the equity is expected to considerably lag the broader market averages over the next six to twelve months. Furthermore, moving a couple of boxes down to the Insider Decisions table, the data here indicate that the number of major stakeholders selling INTC shares is four versus the number buying, which is zero. In fact, recent news reports have confirmed that insiders have been selling shares of the company, which arguably suggests that share prices may be poised to fall further in the near future. Scanning over to the right, the Graph/Price Chart depicts the stock’s range bound movement over the past couple of years (between approximately $19 and $29 a share), which is confirmed in the High/Low table above the graph. However, the equity has pulled back quite a bit from its multi-year peak of $29.30 in 2012, and has fallen into an even narrower trading pattern since the beginning of 2013.
At present, the issue is trading closer to its 52-week low, with a Price to Earnings Ratio of 11.8x 12-month earnings through September. Although these factors, coupled with the company’s price-to-cash flow of about 5.9x, may suggest a good entry point for some investors, a look at the Statistical Array and the Quarterly boxes (sales and earnings) ought to give rise to concerns about the company’s prospects in 2013. The data there confirm aforementioned challenges that may push the equity price lower still.
On the other hand, these obstacles could very well be short-term hurdles. Indeed, analyst Alan House notes that “These shares are a solid choice for the long term” in the Analyst Commentary section of the page. He goes on the point out that Intel’s “Total return potential is sizable out to 2016-2018.” Too, the generous and rising dividend is an attractive highlight for those seeking income. The Financial Estimates and the Annual Rates box support this theory, as the company boasts solid growth rates over the next 3 to 5 years.
However, the major contention with this argument is that these robust expectations are largely contingent upon expanding opportunities in emerging markets, where mobile devices and tablets are also jockeying for market share. While, it is a tough call to make at this juncture, the Value Line page offers a wealth of insight to help investors make the most prudent choice for their investment needs.
At the time that this article was written the author held no positions in any of the companies mentioned.