Posted on by satriadigja

Intel Stock Valuation: Calculated Speculation

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The key point of Intel stock valuation:

  1. Intel’s market cap is 148 Billion (end of July 2022) with 19.8 Billion earnings in 2021. It means that you need 7 years to break even. Too long for a company with no growth prospect like Intel.
  2. Even when the CHIP program is passed and executed, it will not boost Intel’s earnings significantly.
  3. It is not difficult to say that we don’t recommend investing in Intel. But it doesn’t mean that the stock price will not rise in the future.
  4. Like the management says, maybe this is the bottom. But we don’t know how long Intel will be in this pit. But smart investors still could exploit this situation.

This article is the sequel of https://investingdeck.com/business-analysis-of-intel-preparation-for-valuation/

Intel Stock Valuation At a Glance:
From Balance Sheet to Cash Flow

  1. Intel’s cash in hand at the end of 2021 is 4.8 billion. It could cover the 4.5 billion short-term debt, but investors should look at its 33 billion debt also. It is difficult to say that Intel stock is cheap.
  2. In the last three years, Intel always delivered at least approximately 30 billion Cash from Operating (CFO). By using these matrices, investing in Intel will need 5 years to break even. But this calculation is too rough since a company like Intel requires a massive amount of CAPEX.
  3. As competition in the processor market gets more fierce, Intel requires more heavyweight CAPEX which makes the break-even period longer.

Case Study of Intel Stock Valuation:
Some Possible Scenarios. What makes blue chips look cheap?

  1. The best case for Intel is if (big if) it can design a superb processor. Something that much better than Ryzen and M series counterpart. In this situation, Apple could come back to its long-time partner. But this scenario is almost impossible – history tells us. Also, Apple software hardware harmony is world-class. It is difficult to see if Intel could break this. Intel could try AMD’s strategy to spin off its fab to a third party and focus on designing chips, but it is a national issue. Impossible.
  2. Another case is finding new sources of growth. Electric Vehicles or GPU. But still, Intel difficult to compete against the incumbent like Nvidia. It is a dead end almost everywhere.

Fishing The Bottom, How Low.
Investing Strategy – I mean speculation strategy with Intel Stock Valuation in mind. Averaging Down.

Keep these in mind before making the strategy

  1. Intel may look bad in every aspect. But Intel never finished. Intel never goes default like Lehmann’s brother. It has a decent competitive advantage. Intel along with AMD is the sole holder of the x86 patent. The duopoly will last almost forever. Only ARM poses a threat, but it is optimized for mobile. Apple MacBook with M series is also a serious threat but macOS has lack sophisticated apps like its Windows counterpart.
  2. Intel has a strong connection with PC laptop vendor, OS developer Microsoft and sometimes could work with Nvidia and AMD. You sometimes see laptops with an Intel processor but an Nvidia graphics card or AMD.

The Averaging Down

Simply averaging down every 20% dip. Yes, Intel looks like an old man who needs to catch a breath in the chip race against AMD, Nvidia, and Apple. But this old man will never die. Never use significant capital when playing this. You will get a horrible night.

To remind you: https://www.cnbc.com/2022/07/29/amd-passes-intel-in-market-cap.html