Intel: Buy For Solid Financials Despite A Bumpy Year Ahead

Jan. 29, 2019 12:21 PM ETIntel Corporation (INTC)10 Comments
Roman Luzgin profile picture
Roman Luzgin


  • Intel reported Q4 financial results, beating on EPS but missing on revenue. The stock plummeted 5% the next trading day on cautious guidance.
  • Although the revenue miss is a negative event for INTC, the actual numbers are not as bad as they appear. Revenue increased 9.4%, while EPS grew 18% in the quarter.
  • Intel's performance demonstrates strong financial efficiency standards during difficult times, which is the primary reason to own the stock at the moment.
  • Although the competition continues to be stiff, Intel stock provides a solid margin of safety, with almost 3% dividend yield, 10 forward P/E, and impressive revenue and EPS growth.

Intel reports Q4 results

Intel reported quarterly results, the stock plummets

On January 24, Intel (NASDAQ:INTC) reported its financial results for Q4, beating on EPS by $0.06 or 5%. However, the revenue numbers turned out to be slightly lower than expected, which led to numerous negative headlines in the media stating that the difficulties in the semiconductor industry have caught the company. As a result, the stock plummeted 5% the next trading day, plunging almost 8% at some moments.

ChartData by YCharts

While the revenue miss and cautious guidance definitely did not bring positive news, the sell-off in INTC looks like an overreaction. It has been known that the competition with rivals such as AMD (AMD) in the data center and other segments would intensify by the end of 2018, but most of the concerns were already priced in, evident by a sharp decline in the stock price from the highs of July 2018 when the stock was at the level of $57. So, let us review if INTC can bring positive surprise to investors in the near future.

Q4 revenue growth is worse than expected, but the results are still good

In Q4 2018, Intel generated $18.66 billion in revenue, which was $360 million less than expected. The miss on revenue is a rare event for Intel, as it was the second miss on the metric in the last 10 quarters. Clearly, investors were disappointed by the result, which led to a sharp decline in the stock price. However, looking at the results more objectively, it becomes evident that Intel's overall financial performance is far from adverse.

Starting with revenue growth, although the metric was slightly less impressive than expected, the actual number of 9.4% should not be treated as a sign of stagnated business. In fact, it is the second highest growth in fourth-quarter sales since 2011

ChartData by YCharts

This article was written by

Roman Luzgin profile picture
I write about growth opportunities in different sectors related to technology, providing analyses of fundamentals that are driven by current and future trends. Senior Data Analyst by day, I am building and managing my own portfolio of tech-related securities, which to date has consistently beaten the market.

Disclosure: I am/we are long AMD, INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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