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Why Intel Stock Could Rise on Q4 Earnings Beat

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On Thursday, Intel (NASDAQ:INTC) stock rose 5.57% after-hours to $66.85. The semiconductor company reported strong fourth-quarter results on Thursday after the market bell. Intel beat analysts’ revenue and earnings estimates in the fourth quarter.

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Intel’s fourth-quarter earnings

Intel reported an adjusted EPS of $1.52 in the fourth quarter. The earnings beat analysts’ estimates by $0.27 per share. Also, the revenues of $20.21 billion beat analysts’ estimates of $19.23 billion. The revenues in the fourth quarter rose about 8.3% YoY (year-over-year).

In the fourth quarter, Intel’s CCG (Client Computing Group) revenues rose 1.9% YoY to $10.0 billion—more than analysts’ consensus estimate of $9.74 billion. The company’s DCG (Data Center Group) revenues rose 18.8% YoY to $7.2 billion—more than analysts’ consensus estimate of $6.40 billion. The IoT (Internet of Things) revenues rose 16.1% YoY to $1.16 billion in the fourth quarter. In the fourth quarter, the PSG (Programmable Solutions Group) revenues fell 17.5% YoY to $505 million.

In the fourth-quarter press release, Intel CEO Bob Swan said, “In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data.” The report also said, “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.”

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First-quarter and 2020 expectations

Intel expects sales of $19.0 billion in the first quarter—a rise of 18.0% YoY. The chipmaker expects the operating margin to rise 7% YoY to 35.0% in the first quarter. The company expects its non-GAAP EPS to rise by 46.0% to $1.30.

In 2020, Intel expects sales of $73.5 billion—a rise of 2.0% YoY. The chipmaker expects the operating margin to remain flat YoY at 33.0% in 2020. The company expects its non-GAAP EPS to rise by 3.0% to $5.00. In 2020, Intel expects to report free cash flow and capital expenditures of $16.5 billion and $17.0 billion, respectively.

Wall Street analysts expect Intel to report total revenue of $17.8 billion in the first quarter—a rise of 10.7% YoY compared to $16.1 billion in the first quarter of 2019. Also, analysts expect the company’s non-GAAP EPS to rise by 24.7% YoY to $1.11 in the first quarter.

Analysts expect Intel’s revenues to rise by 1.0% in 2020 to $72.7 billion. The sales will likely rise by 2.1% in 2021 to $74.2 billion. The adjusted earnings could fall by around 2.1% in 2020 to $4.77 per share. However, the profits will likely rise by 1.3% to $4.83 per share in 2021.

Analysts increased Intel’s target price

Many analysts increased their target price for Intel stock after the fourth-quarter earnings results.

  • Jefferies increased its target price from $64 to $65.
  • RBC increased its target price from $48 to $56.
  • J.P. Morgan increased its target price from $68 to $80.
  • Credit Suisse increased its target price from $65 to $75.
  • Evercore ISI increased its target price from $60 to $66.
  • Cowen and Company increased its target price from $55 to $64.
  • Wells Fargo increased its target price from $58 to $70.
  • Susquehanna increased its target price from $53 to $62.
  • Mizuho increased its target price from $64 to $71.
  • Deutsche Bank increased its target price from $64 to $72.
  • BMO increased its target price from $53 to $65.
  • Suntrust Robinson increased its target price from $62 to $70.

Intel is covered by 43 Wall Street analysts. Among the analysts, 16 recommend a “buy,” 20 recommend a “hold,” and seven recommend a “sell.” Analysts’ mean target price on the stock is $61.88, which implies a 2.3% loss from the current level of $63.32. The lowest target price estimate is $38, while the highest is $70.00.

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Stock performance

Intel stock rose 0.94% on Thursday and closed at $63.62. The stock was trading 0.6% below its 52-week high of $63.71. Meanwhile, the stock was trading 47.7% above its 52-week low of $42.86. At Thursday’s closing price, Intel had a market cap of $275.4 billion.

In the last 12 months, Intel stock has gained 32.1%. The S&P 500 Index has risen by 25.9%. Nvidia (NASDAQ:NVDA) and AMD have gained 69.4% and 161.2%, respectively, in the last 12 months. Other semiconductor stocks including Qualcomm (NASDAQ:QCOM) and Micron (NASDAQ:MU) have returned 77.7% and 72.9%, respectively.

Based on Thursday’s closing price, Intel stock was trading 5.6% above its 20-day moving average of $59.98. The stock is also trading 8.0% above its 50-day moving average of $58.62 and 14.0% above its 100-day moving average of $55.52.

Intel’s 14-day RSI (relative strength index) score is 74.5. The score indicates that the stock is overbought. Intel’s lower, middle, and upper Bollinger Band levels are $57.71, $59.98, and $62.25, respectively. On Thursday, the stock closed near its upper Bollinger Band level, which also indicated that it’s overbought.

In 2019, Intel’s free cash flow rose 18.8% YoY to $16.9 billion. The company’s operating cash flow also rose by 12.6% YoY to $33.1 billion. Intel’s capital expenditures rose 6.8% YoY to $16.2 billion in 2019. In 2019, the company returned $5.6 billion to shareholders in the form of dividends. On Thursday, the company’s dividend yield was 1.99%.

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