Shares of Intel (NASDAQ: INTC) were up over 5% from Thursday’s close at one point during pre-market trading on Friday following the company’s Q4 earnings after Thursday’s bell. Their EPS and revenue both comfortably beat analyst expectations with the latter showing growth of over 8% year on year. At over $20 billion, this was a record Q4 revenue number for the tech giant whose shares have been on a rip since the end of August.
The company’s client computing and data center business segments were the top performers, together accounting for 85% of the quarter’s revenue alone. And these are segments that are growing at a rate usually seen with younger, more ripe revenue streams. The data center segment was up 19% year on year as the company races to meet surging demand from the growing cloud computing space. As the likes of Amazon and Microsoft expand their cloud offerings, the likes of Intel and their data centers stand well-positioned to capture the spillover growth.
On this point, Bob Swan, the company’s CEO, said “in 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data. One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns."
Compared To Its Peers
Wall Street has been on top of the growing opportunity here for months. Having been range-bound for two years through the end of last summer, shares turned on the heat in August and started the 40% run that looks set to continue today. This will be a welcome reprieve for investors who had grown used to Intel, somewhat understandably considering its size and maturity, lagging the broader tech market over the past decade. Compared to the broader tech market seen in the NASDAQ index, Intel is up just over 200% since January 2010 while the tech index is up closer to 400%. However, since January 2017, the two have gone toe to toe in performance and in a sign of the new lease of life being seen in Intel, in the past six months they’re comfortably the leader.
While the company will struggle to offer investors the same returns that rival chip makers like AMD can and have, the lack of volatility that comes with that will attract a different type of investor. Based on market cap, Intel is about 5 times the size of AMD and their lack of annual triple-digit percentage growth makes them no less attractive.
Earlier this week, Jefferies upgraded the company and Bank of America was out with an upgrade last month and a fresh price target citing the huge growth potential along with the massive $20 billion stock repurchase program and dividend yield as being extremely attractive to investors.
Reasons To Get Involved
When comparing total yield to investors (dividend yield + buyback yield), Intel is ahead of most of its peers in the chip-making space. AMD offers no dividend and has no repurchase program, meaning their total yield is 0%. Nvidia’s (NASDAQ: NVDA) is 2.5%, Intel’s is 7%. Qualcomm’s (NASDAQ: QCOM) is an impressive 26% but for all that, their shares have significantly underperformed Intel’s over the past decade.
For those looking to get involved at these levels, technically the stock is looking structurally sound and has a history of usually playing by the rules. It bounced off support at $43 multiple times in recent years and is heading into blue sky territory with a strong uptrend behind it. This is a company that knows what they’re doing. It’s seeing growth in all the right places and with full-year revenue at all-time highs along with the stock, investors, analysts and management alike are right to be so excited about Intel’s prospects into 2020.
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