Even Intel Corporation Is Lifted by the Rising Tide
In a rising market everything rises. With cash coming off the sidelines to join the billions of dollars released by tax cuts, you can throw a dart at a stock chart today and come up a winner.
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Even Intel Corporation (NASDAQ:INTC) has been a winner, rising 11% over the last three months, almost equaling the Nasdaq’s 12.4% jump.
The question is whether that will continue when the company known as “Chipzilla” reports earnings after the market closes Jan. 25?
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Analysts are expecting 86 cents per share of earnings, and hoping for 89 cents, on revenue of $16.3 billion. That would mean almost $3 per share of earnings for 2017, on shares that opened for trade Jan. 24 at around $46.
Investors who have been late to the stock market party will consider that a bargain. Should they?
A Terrible, Very Bad, No Good Quarter for INTC Stock
The last three months have been terrible, very bad, and no good at all for Intel.
Intel announced in November that its firmware needed patching, as it was allowing hackers and government to take over user PCs via their USB ports. Then, in January, it announced the bugs known as Spectre and Meltdown, vulnerabilities that have apparently existed in Intel microprocessors for decades.
The bugs overshadowed CEO Brian Krzanich’s demonstration of gee-whiz technology at the Consumer Electronics Show, and now Intel’s process for fixing the problems is being called a “total train wreck”
Along the way it came out that Krzanich had sold as many Intel shares as he could after he learned of the problems, and before they were made public. I suggested he should be fired.
The only good news for Intel may be the boost it’s getting in mobile, as rival Qualcomm, Inc. (NASDAQ:QCOM) has been fined over $1 billion by the European Union for how it kept Intel chips out of Apple Inc. (NASDAQ:AAPL) hardware. Apple has been battling Qualcomm’s business practices in mobile for over a year, wanting to cut the charges it pays for the company’s patents if it buys Intel chips.
Getting Better?
Analysts, however, quickly write-off yesterday, and investors are only buying tomorrow.
Most analysts following Intel still have it on their buy lists. Over the last three months, as all these troubles have surrounded the company, the mood among analysts has improved a little. Only three of the 37 now following the company are recommending investors sell the stock.
There is reason for that. Since Krzanich became CEO, in May 2013, the value of Intel shares have doubled, and the company’s dividend is up over 10%. The shares even busted out of their long-running trading range in 2017, rising from a low of about $33 per share last July to their current level.
Intel maintains a near-stranglehold on the market in many areas. Its x86 chips dominate cloud computing. It is one of only four microprocessor manufacturers left. Its overall margins have been rising through 2017.
The Bottom Line on Intel
No company has changed the last half-century so much as Intel.
All the wonders of the 21st century, from smartphones and PCs to clouds and the internet, stem from Moore’s Law, the idea that chip densities can double every year.
What I have dubbed Moore’s Second Law also makes Intel invaluable, despite its problems. As chip densities increase, the cost to develop them rises in proportion. Nearly all of Intel’s chip rivals today are “fab-less,” dependent on fabs like Intel’s for their production, because the capital costs are so high.
Thus, Intel and its problems get a pass from the industry. I don’t think they should get a pass from investors, but that is a minority report.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
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