Today we have a moderately speculative idea.: take shares of the American technology company Intel (NASDAQ: INTC), in order to capitalize on the rebound of its shares after the recent fall.
Growth potential and validity: 14% behind 14 Months; 59% behind 3,5 of the year. All excluding dividends.
Why stocks can go up: positive changes are planned in the company's business.
How do we act: take now 55,15 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
In 2020, we published a detailed analysis of the company's business, so let's not repeat ourselves.
Arguments in favor of the company
Fell down. The company's shares have fallen sharply this year.: with 68,26 $ in April 2021 to 50,99 $ in November 2021. But nothing particularly terrible happened.: the company's business is quite successful and in demand and it is inexpensive - P / S about 2,5, a P / It's about 11. So it is quite possible to take these stocks based on their rebound..
Room for improvement. Yesterday it became known, that the company plans to make its Mobileye Automotive Technology Solutions division a separate company and list it on the stock exchange. Sector indicators 2020: revenue of $967 million and operating profit of $241 million.
It's too early to talk about the price, but, probably, Intel will be able to make good money on this. Considering, that the unit is profitable, its capitalization may be more than 50 billion. By the way, Intel bought Mobileye in 2017 for 15 billion.
This news came out in the context of pressure from activist investors from the Third Point fund on the company's management: Intel shares have been treading water for the past few years., despite the fact that Intel has a good business. Think, that everything will not end with the withdrawal of Mobileye to the exchange and other positive changes are ahead of us, that will lead to the growth of Intel shares.
Wrecked. Intel pays 1,39 $ dividend per share per year, what gives now 2,51% per annum. The company spends $5.679 billion a year on dividends, roughly 26,91% from her profits for the past 12 Months, - so that payments may well double. Moreover, this fits into the policy of appeasing investors-activists by the management of the company..
But even those dividends, what already is, can attract many fans of passive income into the company's shares, why stocks rise. After all, by the standards of the technology sector 2,51% per annum is a huge profit.
What can get in the way
Customer concentration. According to the annual report, only three clients give a little less than half of the company's revenue: Dell — 17%, Lenovo — 12% и HP — 10%. Reconsideration of relations with one of them can be very bad for Intel.
Somehow in general. AMD rivals overtake Intel on corners, forcing the latter to invest in the expansion and development of its own technological capacities. This significantly reduces the likelihood, that Intel may dramatically increase dividends in the near future.
May be, Intel will even cancel dividends for higher goals, how Western Digital did it. Moreover, there is a good reason for this.: the company plans to spend $100 billion in the foreseeable future to develop production, and its accounting department is burdened with 77.875 billion debts, of which 29.572 billion must be repaid within a year. Intel doesn't have much money at its disposal: 7,87 billion in accounts plus 8.4 billion debts of counterparties.
Truth, considering also other liquid assets of Intel, then the amounts at its disposal are more significant - more than $ 40 billion. But, taking into account the company's plans for the renewal of fixed assets, payments may well cut. And without dividends, these shares will lose a significant part of their attractiveness..
Well, in general, the rivalry with AMD will absorb all the strength of Intel and slow down the growth of its quotes..
What's the bottom line?
Shares can be taken now by 55,23 $, then there are two options:
- wait, When will the company's shares be worth 63 $. Think, we will achieve this result in the following 14 Months;
- if you took shares for a long time, then you can now buy them with an eye on that, what is the third point for these 3,5 year will force Intel management to increase payments or take other steps, contributing to the improvement of the situation with the value of shares. This should lead to a significant increase in quotes..
It also does not hurt to look at the news section of the company's website, in order to have time to sell shares on the St. Petersburg Exchange before, like american, and after them, Russian investors will have time to react to the news about the reduction or cancellation of dividends.
