20% Upside For Intel Stock?

Up just 10% from its low in March, we believe Intel stock (NASDAQ: INTC) has room for more than 20% upside to levels reached around the start of 2020. The company’s stock trades at $49 currently and is, in fact, down almost 20% so far this year. It traded at $67 in February 2020 – just before the outbreak of coronavirus – and is currently 25% below that level, as well. Further, with the rise in computing and gaming device sales, demand for the company’s products should pick up in the near to medium term, and the stock has the potential to rise around 20% to its early-2020 levels. Our conclusion is based on our comparative analysis of INTC stock performance during the current crisis with that during the 2008 recession in our interactive dashboard.

2020 Coronavirus Crisis

Timeline of 2020 Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • Since 3/24/2020: S&P 500 recovers 67% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

In contrast, here is how INTC stock and the broader market fared during the 2007-08 crisis.

Timeline of 2007-08 Crisis

MORE FOR YOU

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

INTC and S&P 500 Performance Over 2007-08 Financial Crisis

We see INTC stock declined from levels of around $22 in September 2008 (pre-crisis peak) to levels of around $13 in March 2009 (as the markets bottomed out), implying INTC stock lost over 40% from its approximate pre-crisis peak. It recovered post the 2008 crisis, to levels of just above $20 in early 2010, rising by around 60% between March 2009 and January 2010. The S&P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 to 757 in March 2009. It then rallied to levels of 1,124, rising by about 48% between March 2009 and January 2010.

INTC Fundamentals Over Recent Years

INTC revenues increased from $55.4 billion in 2015 to $72 billion in 2019, due to higher revenues across all revenue segments. Along with higher revenue, earnings also jumped, with EPS rising from $2.41 to $4.77 during this period.

Does INTC Have Enough Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

Intel’s INTC total debt rose from $25.3 billion in 2016 to $29 billion in 2019, while its total cash decreased from around $8.8 billion to $5.3 billion over the same period. Further, the company generated around $33 billion cash from operations in fiscal 2019. This steady cash position combined with strong cash from operations provides the company a reasonable cushion to deal with the current crisis.

Conclusion

Phases of Covid-19 Crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • July-November 2020: Weak Q2 and Q3 results, but continued improvement in demand and progress with vaccine development buoy market sentiment

Despite the recent surge in the number of new Covid-19 cases in the U.S., we see the rise in computing and gaming device sales to continue on the back of the surge in online activity. We believe that Intel stock has potential upside in the near term, and even as the lockdowns are gradually lifted, a drop in computing device demand does not seem very likely. This could see Intel stock potentially rise over 20% from its current level.

What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance TeamsProduct, R&D, and Marketing Teams

Comments are closed.