Is Intel’s Recent Pullback An Opportunity?


In a previous article we talked about how panic and fear can create buying opportunities. As fear spreads many investors will abandon their plans showing a complete disregard for any long-term investing plan based on fundamentals. It looks like we are flirting with this territory again after the super committee failure and the ongoing financial drama in Europe creating long term opportunities.

We’ve published two focus articles on Intel (INTC) with the following results:

Date Fair Value Closing price Conclusion
4/6/11 25 19.43 Attractive
8/8/11 28 19.93 Attractive

Since these dates INTC closed at 22.65 on November 25 after hitting 25.50 on November 16. The stock is up 16% since April. This article re-evaluates fair value based on of recent results.

Intel reported record revenue ($14.3B) on October 18, 2011 and provided higher Q4 guidance. The Q4 midpoints are:

  • Revenue: $14.7 billion.
  • Gross margin 65 percent; Non-GAAP gross margin 66 percent.
  • R&D plus MG&A spending: approximately $4.3 billion.
  • Amortization of acquisition-related intangibles: approximately $75 million.
  • Impact of equity investments and interest and other: a net loss of approximately $30 million.
  • Depreciation: approximately $1.4 billion.
  • Tax Rate: approximately 28 percent.
  • Full-year capital spending: $10.5 billion.

Intel appears to be running on all cylinders, exceeding our expectations despite the worsening macroeconomic events. Management has yet to release 2012 guidance but CEO Paul S. Otellini said they would provide a forecast for 2012 in January.

VALUATION
Here is our updated fair value analysis based on the numbers. Fair values are based, in part, on the following: discounted cash flow, a modified Graham’s intrinsic value formula and a P/E analysis…..Click Here to read the full article at SA.

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One Response to Is Intel’s Recent Pullback An Opportunity?

  1. Fadi El-Eter says:

    What pullback? INTC is currently trading at $23.60, the year’s high is $25.50. INTC may be undervalued, but I don’t see the latest movement as a pullback that one need to take advantage of.

    I do think though that INTC will rebound greatly as of mid December…

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