How Much Momentum Is Left in Intel Corporation (INTC)?

Intel Corporation (INTC), a leading giant in the U.S. semiconductor industry, reported impressive results for the fiscal second quarter of 2023. This notable upswing is fueled by the rejuvenated personal computer market.

The company has remarkably exceeded analysts' predictions, bouncing back from two successive quarters of extraordinary losses.

The personal computer market has experienced a significant downturn over the past year, with inventory piling up because consumers had already bought required machines during the pandemic.

However, chip giant INTC, a global leader in computing and related products, has managed not only to meet but surpass its top-line and bottom-line estimates for the fiscal second quarter that ended July 1, 2023, indicating that the PC market slump is easing.

Charter Equity Research’s Analyst, Edward Snyder, said, "Intel did outperform almost exclusively on the strength of desktop sales which rebounded from a near-record low last quarter."

For the fiscal second quarter that ended July 1, 2023, INTC's foundry business, focused on manufacturing chips for third-party companies, reported revenue of $232 million, up from $57 million in the year-ago quarter. The growth is driven by “advanced packaging,” a process in which INTC merges chip components produced by other companies to create a more powerful chip.

However, despite these gains, the company’s total net revenue declined 15.5% year-over-year to $12.95 billion, whereas its non-GAAP gross margin stood at 39.8%, compared to 44.8% in the prior-year quarter. Non-GAAP net income attributable to INTC and earnings per share declined 52.5% and 53.6% year-over-year to $547 million and $0.13, respectively.

In contrast, INTC’s CEO Pat Gelsinger recently announced a significant development. The company has enough customer orders for AI accelerator chips, the sales of which could reach at least $1 billion by 2024. The achievement could be a significant leap for the company, which could solidify its position.

Let’s look at the trends of some of INTC’s key financial metrics to understand why it could be wise to wait for a better entry point in the stock.

Analyzing INTC's Net Income, Revenue, Gross Margin, and Analyst Price Targets 

Here is a summarized overview of the trends and fluctuations in INTC’s trailing-12-month net income:

• On September 26, 2020, INTC reported a net income of $21.95 billion.
• Through the rest of 2020 and 2021, the net income fluctuated moderately from a high of $21.95 billion (September 2020) to a low of $18.56 billion (June 2021).
• In an interesting shift, INTC saw a strong increase into 2022, peaking at $24.62 billion by April 2022.
• However, the second half of 2022 brought a substantial decrease, with net income falling significantly to $13.3 billion in October 2022, then further reducing to $8.01 billion at the end of December 2022.
• Further into 2023, INTC faced a challenging period with net income dropping into negative territory, reporting a net loss of $2.86 billion and $0.92 billion in April and July, respectively.

Thus, over a significant portion of the considered time period, INTC’s trailing-12-month net income generally followed a declining trend. The company reflects a negative growth pattern from the initial value of $21.95 billion (September 2020) to the last recorded value of negative $0.92 billion (July 2023).

Looking at INTC’s trailing-12-month revenue data, we can observe a trend characterized by fluctuations over a specific period from September 2020 to July 2023. Here are the highlighted trends:

• On September 26, 2020, the company posted a substantial revenue of $78.10 billion. Until December 2022, there was relatively minor fluctuation, with the revenue figures hovering around $77 billion to $78 billion.
• The peak of this series was on December 25, 2021, when the revenue touched $79.02 billion.
• However, from April 2022 onwards, a negative trend was visible as INTC reported a continuously decreasing revenue. Its revenue stood at $77.70 billion in April 2022, which dropped sharply to $69.54 billion by October 2022.
• The most significant drop occurred in the last quarter of 2022. It plummeted to $63.05 billion by December 31, reminiscent of a strong downtrend.
• Continuing this negative trend in the first half of 2023, the revenue further shrunk to $56.42 billion in April and then to $54.04 billion by July.

INTC’s revenue has decreased by approximately $24.06 billion from September 2020 to July 2023. Hence, there was a negative growth rate during this period. This paints a worrying picture for the company, which has been experiencing a shrinking revenue base recently.

INTC’s gross margin has experienced a downward trend over the examined time frame from September 26, 2020, to July 1, 2023. Here are the notable highlights:

• September 26, 2020: 56.5%
• December 26, 2020: 56%
• March 27, 2021: 54.6%
• June 26, 2021: 55.6%
• September 25, 2021: 56.3%
• December 25, 2021: 55.4%
• April 2, 2022: 54.3%
• July 2, 2022: 49.8%
• October 1, 2022: 46.6%
• December 31, 2022: 42.6%
• April 1, 2023: 38.3%
• July 1, 2023: 38.3%

The overall decline from the first reported value of 56.5% in September 2020 to the most recent value of 38.3% in July 2023 represents a significant reduction in INTC’s gross margin.

This indicates a negative growth rate of 18.2% within this period under evaluation. The last reported value emphasizes the seriousness of this downward trend, standing at 38.3% as of July 1, 2023, which is a substantial decrease when compared to the highest recorded margin.

INTC’s analyst price target experienced a downward trend along with certain fluctuations over the reported period. Here are a few noteworthy observations:

• From November 2021 to March 2022, the analyst price target remained constant at $55.
• In April 2022, the target decreased slightly to $52-$53 and continued to decline steadily in the subsequent months, reaching $30 by November 2022.
• Towards the end of 2022 and the beginning of 2023, the price target plateaued at $30 before a further drop to $28 in February 2023.
• A gradual upward trend can be observed starting from April 2023, growing from $28.2 in April 2023 to $32 in August 2023.

Considering the data, the overall trend is a significant decrease from $55 to $32. This represents a negative growth rate of about 42%. However, considering recent data, the scheme showcases an ongoing recovery from its lowest point at $28 in early 2023.

Analyzing INTC's share price fluctuations from February to July 2023

The following bullet points highlight significant trends and the growth rate of INTC's share prices from February to July 2023:

• February 2023: A decreasing trend was observed, from $30.13 on February 3, 2023, declining to $25.75 by February 24th, 2023.
• March 2023: The trend in March depicted a recovery. From a low of $25.51 on March 3, the share price gradually increased to finally reach $30.85 on March 31.
• April 2023: April saw a rise in the first half of the month, with the highest price of $32.93 on April 6, but a fall was seen during the latter part. By the end of the month, the stock price had dropped to $29.82.
• May 2023: May experienced a slight fluctuation. The price initially bounced back to $30.69 on May 5, but by May 26, it had decreased again to $28.96.
• June 2023: In June, the stock price experienced a consistent upward trend, reaching a peak at $34.70 on June 16 before slightly decreasing to $33.43 by June 30.
• July 2023: Overall, July recorded a steady upward trajectory. The price gradually rose from $32.53 at the beginning of the month and ended at a high of $36.09 on July 31.

In summary, INTC’s share price over this period initially dipped and then gradually recovered with some fluctuations. By July, it surpassed its initial value signifying a positive growth rate. However, there was no apparent acceleration or deceleration in the trend. Here is a chart of INTC's price over the past 180 days.

INTC's Noteworthy Performance: Mixed Value, Steady Momentum, and Rising Sentiment

The POWR Ratings of INTC, under the Semiconductor & Wireless Chip industry, show gradual fluctuations over time. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

As of July 31, 2023, the INTC’s overall POWR Ratings grade is a C, equating to Neutral, with its rank in the Semiconductor & Wireless Chip category being #54 out of 92 stocks. Its C grade suggests that the stock currently has a mixed performance with good and bad attributes. Here is an overview of its progression:

• From February to April 2023, INTC maintained a steady C (Neutral) POWR Grade and hovered around the #60s in terms of rank in the category.
• By May 2023, INTC's POWR Grade dropped to D (Sell), with the rank dropping to #79. This demonstrates a decline in the company’s performance at this time.
• However, starting from July 2023, the POWR Grade bounced back to C (Neutral) with an improved rank of #54.

According to INTC’s POWR Ratings, the three most noteworthy rating dimensions are Value, Momentum, and Sentiment. These dimensions have shown high ratings and clear trends over time.

Value: In February 2023, the value dimension had the highest rating of all dimensions at 92. It dropped slightly to a score of 91 in March 2023 and fell again to 86 in April 2023. Its rating for May and June 2023 was 62 and 63, respectively, showing a significant decrease. However, by July 2023, it rose slightly to 66.

Momentum: This dimension consistently maintained high ratings through 2023. Rising from 58 in February to 69 by the end of March, it continued its upward trend hitting 80 in April. By May, it fell slightly to 78. It elevated again to its peak at 95 in the month of June. In July, while still high, it dipped slightly to a score of 90.

Sentiment: The sentiment rating began at a modest 9 in February 2023. By March, there was a notable increase to 22, subsequently increasing to 30 in April. The sentiment rating rose dramatically to 60 in May, indicating a positive upward trend. June witnessed a slight fall with a score of 54, though it bounced back robustly in July with a rating of 73.

These key metrics reflect a somewhat volatile journey for INTC but one characterized by substantial momentum and positive sentiment by mid-year 2023.

How Does Intel Corporation (INTC) Stack Up Against Its Peers?

While INTC has an overall grade of C, equating to a Neutral rating, check out these other stocks within the Semiconductor & Wireless Chip industry: SUMCO Corporation (SUOPY), Infineon Technologies AG ADR (IFNNY), and Renesas Electronics Corporation (RNECF), with an A (Strong Buy) rating.

What To Do Next?

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INTC shares were trading at $35.93 per share on Tuesday afternoon, up $0.16 (+0.45%). Year-to-date, INTC has gained 38.16%, versus a 20.29% rise in the benchmark S&P 500 index during the same period.

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.

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