Work-From-Home Trend Bolsters Demand for Intel
We are maintaining our $70 fair value estimate for wide-moat Intel. Shares look attractive at current levels.
Intel (INTC) reported better-than-expected first-quarter results amidst a turbulent economic climate stemming from COVID-19. Strong cloud and mobile PC demand bolstered revenue, driven by the increased impetus for working and learning from home. Management expects this momentum to continue into the second quarter. While the firm provided second-quarter guidance, it refrained from providing its typical full year outlook given the significant economic uncertainty. Given the expected contraction of global GDP this year, we expect the second half of 2020 to be weaker for Intel. Nevertheless, we believe the firm has done a nice job in response to COVID-19, with all its factories continuing to run and greater than 90% on-time deliveries. We look forward to a bevy of 10-nanometer product ramps throughout 2020, including its Tiger Lake CPUs for laptops, Ice Lake server CPUs, and 5G Snow Ridge base station system-on-chip. We are maintaining our $70 fair value estimate for wide-moat Intel. Shares look attractive at current levels.
First-quarter revenue was $19.8 billion, up 23% year over year. Intel enjoyed broad-based growth except for the Internet of Things group, which saw weakness in industrial and retail end-markets. Data center, or DCG, and client computing, or CCG, groups were up 43% and 14%, respectively. Cloud sales grew 53% year-over-year and overall DCG ASPs rose 13%. We think competition from AMD will pick up in subsequent quarters, which will make it difficult for Intel to sustain these growth levels throughout 2020. Notebook CPU volumes rose 22% year over year, as Intel both mitigated CPU shortages and satiated the increased work from home-related demand. Gross margins were up 400 basis points year over year to 60.6%, led by strong ASPs. Management expects second-quarter sales to be at a midpoint of $18.5 billion, which would be up 12% year over year, with PC-centric sales flat to up slightly and data-centric sales up 25%.
|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 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:
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.