Intel: Wait For Pullback To The Low $20s
Intel (INTC) is the world’s largest chip maker with revenues in excess of $54 billion, and a gross profit margin of 63.6%. On January 19th, Intel reported it had completed an “exceptional year” by ending 2011 with revenues up 24% from the previous year and Earnings per Share up 19%. By all accounts, Intel had a record year. Intel’s stock has also seen a steady upward trend from around $25 when 2011 year-end financials were announced to near $28.50 recently. Q1 2012 earnings announcements are right around the corner, and the question to be answered is whether Intel is still a good buy or if the recent run-up has made the margin of safety too small to justify buying.
Any well reasoned analysis needs to take a look at competitors. Intel’s competitive universe includes one arch-rival in Advance Micro Devices (AMD), and one upstart in ARM Holdings plc (ARMH). AMD is a fraction of Intel’s size and one of its few direct competitors. On January 24th, AMD reported 2011 annual results of $6.6 billion in revenue, which was essentially flat from the previous year as well as a sharp drop in operating income with $368 million for 2011 down from $848 million for 2010. Gross profit margins for 2011 were 45%, down slightly from 2010′s 46% level. AMD announces Q1 2012 results on April 19th, and per the CFO commentary released on January 24th, the company is expecting Q1 revenue to drop around 8% from the previous quarter and gross margins are expected to stay constant at 45%. To continue reading, click here.