hi i'm jimmy in this video we're looking at intel ticker symbol intc so a lot has happened with
intel mostly that their stock has continued to crash multiple times over the past year or so our
goal with this video is to see if the most recent drop makes the stock look like a good buy now it's
also important to point out that i personally own shares of intel and if you're curious i bought
those shares right around this time period and i looked it up recently my average entry price for
this stock is 48.17 right now as i'm doing this video well the stock is slightly above 47 per
share so that's slightly below where i personally bought it okay so let's dive into their business
and look at what's been happening with their stock recently and then we'll see if we can come up with
what could be a fair value for their stock okay so let's look quickly at intel's business so broadly
speaking intel breaks their business into two main segments their largest segment is their pc
centric business which accounted for about 52 percent of 2019 revenue and then their slightly
smaller segment is what they call their data centric business which accounted for the other 48
of revenue now intel goes ahead and breaks their data centric business into more let's call them
sub segments so let's touch on some of the key ones or at least some of the key news that has
come out of the most recent earnings report which was the cause for the most recent crash in intel
stock so one announcement out of the earnings report is that intel's selling their nand business
they're selling it to sd hynix and that that actually came out a few days before their earnings
report but they went over it in their earnings report so we should probably at least take a
quick look at and if we're curious nand is mostly referring to intel's flash memory business and
in my mind it actually makes sense for intel to sell this business because what they can do is
they can take that capital and apply it to other lines of business that in theory have more upside
just as an example intel says that they're using the nine billion dollars that they're getting for
selling the business and they're going to apply to segments like artificial intelligence edge
computing and 5g so i think we can all agree that these business lines are probably more productive
uses of that capital okay so that's a positive thing now let's shift over and look at some of
the negatives so i think that the broader attitude of investors or wall street towards intel has been
fairly negative and i think that this at least partially explains why the stock stock keeps
getting as hurt as it does pretty much every time they come up with earnings now i'm not saying
that the negative attention isn't deserved intel in their most recent earnings report
well that was the third quarter report well in the third quarter they saw a dip in their data center
revenue they dropped that revenue dropped by seven percent and then there was a drop
in what they call their enterprise and government segment and that was a surprise to many analysts
so yes there has absolutely been problems for intel and i think that ultimately the
fear is that companies like amd or nvidia will take away from intel's core business
since many of amd's and nvidia's products compete with what intel's products are trying to do and
since intel has fallen behind at least from a product development standpoint at least for
some of their product lines well it's very logical and easy to make the case that a company like amd
or nvidia deserve investments more than a company like intel for me a lot of the concerns about
losing business is at least losing business to competitors is completely logical but with that
being said i don't think that the takeover of intel's business is quite as imminent as
it could be here's what i mean and don't forget this is just my opinion and i do own shares of
intel so it's very possible that i have sort of rose-colored glasses on although i'm trying really
hard to stay objective and not to see things from a skewed perspective but here's the way i see it
this is a chart of the growth of intel's revenue versus amd's revenue from the past 12 months
compared to the 12 months before that and as we could see well amd has grown significantly larger
or significantly faster than intel has grown in fact amd has grown at almost triple the rate of
intel but here's where the real problem is for intel and that is that amd is growing at the
expense of intel many of intel's customers or at least some of intel's customers are going to amd's
products so it's not necessarily just that amd is growing it's that they are taking the business
away from intel so in theory intel will lose growth and amd will pick up more growth for at
least as long as amd's products are comparable but cheaper or superior to intel's products
so with that being said when i say that i don't think that this is a imminent problem what do
i mean by that well it is a problem i'm just suggesting that it's not like the game is over
and amd has won to illustrate let's switch this chart this is the percentage growth of revenue
from the past 12 months to the previous 12 months compared to the previous 12 months but now let's
switch this to the dollar growth over the exact same time period for the two companies now we
can see that yes intel is growing at a slower rate than amd is but intel is so much larger than amd
is that the actual dollar growth for intel is way bigger to put this in another light amd's total
revenue over the past 12 months is about the same as intel's growth from year over year and if we're
curious to see intel's total revenue compared to amd's total revenue well clearly we can see
that intel is quite large relative to a company like amd now i'm not denying that amd is growing
at a much faster rate and that's great that's a great thing for amd i'm just suggesting that they
still have a long way to go so here's another way that we can look at it so i was curious how
long it will be before amd catches up to intel at least from a revenue perspective and here's just
one possibility so we know that over the past year amd has grown by 30 and intel grew by 11
now i don't expect either company to be able to maintain those numbers for any lengthy
period of time so i went back and calculated the average growth over the past few years and when
i calculated the average revenue growth for amd going back to 2014 while their average growth was
about nine percent and i also calculated intel's average growth over that very same time period and
their average growth was about six percent now as far as amd is concerned this number actually
seems kind of low for me they did have one really bad year so that's skewing the numbers but either
way let's imagine that amd can grow every year by 15 and we also want to be conservative with intel
so let's imagine that we say that intel can grow by three percent a year so if we take these growth
rates and then we take our starting revenue from the past 12 months and we grow that out each year
and we continue to grow them out year by year or we can see that it would be about 21 years
before amd and intel are the same size now obviously it won't actually happen like this
either company could do a lot to help or hurt their growth rate in the next 21 years but the
reason i bring this out is that i believe that many investors are overlooking the fact that intel
has a lot of advantages simply from their size to help improve or regain if maybe partially
some of their competitive advantage and if they do well what does that look like for their stock
i'm guessing it would help a decent amount now they do need to do a decent amount to regain some
of their industry dominance but i'm just saying the game's not over yet and i think that it's
very short-sighted to write off a company that has so much size and so much revenue and broadly
speaking better margins so i think it would be a bit early to just say okay amd's beat them it's
over they could make moves sort of like they did with the uh sale of their more lagging business
like the one that they did to sk hynix they take that capital and apply to more growth oriented
business lines and they have the cash to do that or they can bring in the cash they have the cash
to make other acquisitions there's a lot of things that they can do okay now let's look at what intel
stock could be worth today well last time i did this video i did it at the end of july well there
i use a discounted free cash flow calculation and here i came up with that was the calculation i had
used and i came up with a fair value of 92 dollars per share or 88 dollars per share if we adjust the
fair value of the stock for net debt now when i rechecked analyst estimates that's these up
top here well there wasn't a significant change between these numbers and the new updated numbers
so if we're okay with the seven and a half percent required rate of return well then the current
stock price of forty seven dollars per share looks like a steal so we might ask the question will i
personally be buying more shares and the answer is yes it is very likely that i will buy more shares
assuming that the stock doesn't go on some sort of crazy run in the next couple days
although i do recognize that over the long run they could lose some of their business they could
continue to lose more of their business to amd i recognize that that is a threat and that is their
biggest threat overall but i believe that the the stock market has overreacted by selling intel as
far down as they have and i think that it should be worth more should really be worth 92 per share
i'm not sure about that but there's a huge margins margin of safety between 92 or even the 88 dollars
and the current price of 47. even if we think it's worth 10 or 20 or 30 dollars less
there's still a decent amount of upside now with that brief pro and con recap well we might ask
if i like it so much how come i haven't bought more shares of intel just yet and the answer to
that is that i wanted to make this video before i did and as i've mentioned in previous videos
i feel much more comfortable with making a video about a company listing the pros and cons going
through my research and then if it's good going out and buying the stock assuming of course that
it fits my overall portfolio to me that's much better than buying a stock without saying anything
and then publishing a video talking about how much i love that stock and try to run up the stock
price so that's why i haven't bought it just yet once this video gets published i'll give everybody
a couple days to decide what they want to do and then i will make my move which is why ideally i'm
hoping the stock stays down for just a few more days now i know that we looked at some of intel's
and amd's growth on this video and i actually did a video not too long ago where i compared intel to
amd using something called the price to earnings growth ratio or peg ratio for short so if you're
curious that could be a good way to look at this stock or another way to try to value this stock
so perhaps that could be a good next video for you to watch if you're interested i got a link
right here i got a link in the description below and thank you so much for sticking with me all the
way to the end of the video i really appreciate it thanks and i'll see in the next video