Skip to Content
Stock Analyst Update

Intel Sell-Off Overdone, Shares Cheap

Near-term headwinds weighed on the chipmaker, but our long-term thesis is intact.

Mentioned:

 Intel (INTC) reported fourth-quarter results that fell modestly below our expectations, mostly due to a $200 million shortfall in modem demand from Apple, as well as softer demand in China, a digestion period in the cloud, and a tepid NAND environment. While these near-term headwinds will likely persist for a few quarters, we believe the 7% sell-off in Intel shares during after-hours trading was overdone. Management projected 2019 revenue will still grow, albeit only slightly. Nevertheless, given the macroeconomic weakness, U.S.-China tensions, and competitive pressures from AMD, we view this forecast as reasonable. With Intel’s 10-nanometer Ice Lake PC processors on track to be in OEM systems on shelves for holiday 2019 and the firm’s data-centric growth engine firing on all cylinders, we see an attractive margin of safety in this wide-moat chip titan relative to our unchanged $65 fair value estimate.

Fourth-quarter sales grew 9% year over year to $18.7 billion, thanks to growth across nearly every business segment with the exception of the Internet of Things group. PC-centric revenue rose 10% as notebook and desktop ASPs rose 6% and 13%, respectively, thanks to a richer product mix skewed to the likes of gaming. Following three-straight quarters of over 20% year-over-year growth, data center group sales grew only 9% for the quarter, due to softer China demand and cloud deceleration. Within DCG, 24% cloud segment growth and 12% communications service provider growth was partially offset by a 5% decline in enterprise sales. Positively, Xeon average selling prices were up 5% year over year, as cloud and enterprise customers alike move up the stack due to more compelling features.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.