• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Should I Be in Intel Now?

Do I want to buy equity here? I have enough exposure to the semis as whole right now.
By STEPHEN GUILFOYLE
Oct 25, 2019 | 11:34 AM EDT
Stocks quotes in this article: INTC, TSM, TXN, NVDA, AMD, MU, WDC

My Football

I'll never forget Christmas morning 1973. I was still a child. I had asked for a football for Christmas that year, and Santa Claus came through in the clutch that year. A Wilson football with a fake OJ Simpson autograph stamped on the exterior. I could not wait to get outside and show the guys. I was now king. I was the guy with the football. Long before anything negative had become of OJ Simpson's reputation, and just nine days prior to that Christmas, OJ had torched my NY Jets in the snow at Shea Stadium for 200 yards, rushing to end that 14 game season with more than 2,000 yards. In 1973, OJ had become the best there ever was.

At least for the next couple of years, I was the necessary guy. Street football was what kids did after school in the 1970's. The game did not start until I showed up, and the game ended when I went home. You laugh? The economy was a bit tougher on common folk back in the day, and owning one's own football was indeed living high on the hog. I can still hear the older kids as late afternoon melted into dusk. "What are you going to do? Take you're football and go home?"

Intel Reports

Those who read me often know that this is exactly what I did. A long time supporter of Intel (INTC) , this last time I held the shares, the position did not perform. I had to manage my net basis, and once I was back in the green, I got out. I took my football and went home. This morning, that sale now appears to have been premature.

For the firm's third quarter, Intel reported adjusted EPS of $1.42, soundly beating expectations. Though revenue generation of $19.2 billion comes to growth of just 0.2% (a fourth consecutive quarter of less than impressive performance), that print also handily beat what the street had been looking for. What I want to know is, should I be in this name at this point? I know that's what you want to know as well. Let's explore the guts of this release.

What's Inside

Intel's largest business segment is the Client Computing Group. This group makes processors for personal computers and laptops. The CCG segment contributed $9.71 billion (or 50.6%) to the whole. This beat expectations but still showed a 5% decline from the same quarter last year.

The part of the firm that is showing impressive growth is the Data Center Group. This business generated $6.38 billion in sales, +4% y/y, and soundly beating consensus. If one is in the name, or considering taking that step, this is the key number.

Some smaller parts of the firm are growing even faster, such as the Internet of Things (+9%), Mobileye (+20%) and Memory (+19%), but in aggregate, these three groups contributed less than $2.6 billion in revenue to the headline number so at least for now, they are less significant.

For the quarter, there were quite a few key metrics that investors will notice contracted badly from Q3 2018. Operating income printed at $6.4 billion, -12%, Net income hit the tape at $6 billion, that's down 6%, and gross margin declined from 64.5% to 58.9%. Through this past quarter, the firm generated about $10.7 billion in cash from operations. paid $1.4 billion in dividends and spent $4.5 billion repurchasing 92 million shares. On Thursday evening, the firm announced a $20 billion increase to be made to that buyback authorization.

Guidance

The forward looking guidance is quite positive. The firm guides Q4 revenue toward $19.2 billion versus consensus of $18.8 billion, and adjusted EPS toward $1.24 versus expectations of $1.21. Intel also guided the full year numbers above consensus in the same release. On this guidance, CEO Bob Swan stated, "Our priorities are accelerating growth, improving our execution and deploying capital for attractive returns. We now expect to deliver a fourth record year in a row."

My Take

I don't dislike Intel. I think the worm has clearly turned in a positive direction for the semis as a group. Believers will point to the aggressive positioning laid out by Taiwan Semiconductor (TSM) last week. Naysayers will point toward Texas Instruments (TXN) . I think investors have to be selective in choosing areas of the larger industry where they want to be. The data center, regardless of recent cloud type equity performance is a driver of growth. My favorite name there remains Nvidia (NVDA) , and I also like what Lisa Su is doing at Advanced Micro Devices (AMD) . I remain long both of those names. As to memory, Micron (MU) is the on again, off again industry darling, but Western Digital (WDC) pays me a dividend. Not exactly oranges to oranges, but $2 a year sure beats zero.

The Chart

The chart is positive. This morning we have a breakout of an ascending triangle that formed in the wake of the late April meltdown. We now see the gap created by that selloff finally filling after a six month period of higher lows.

Do I want to buy equity here? I have enough exposure to the semis as whole right now. I think I would rather sell January $52.50 puts for a rough $1.30, and pocket the premium. If the shares sell off by then, and I hang on to the puts, a net basis of $51.20 doesn't sound nearly as risky.

(Nvidia is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle was Long NVDA, AMD, WDC equity.

TAGS: Earnings | Investing | Options | Stocks | Technical Analysis | Trading | Semiconductors & Semiconductor Equipment | Technology

More from Investing

Traders Appear Stuck as Tariff Deadline Looms

James "Rev Shark" DePorre
Dec 9, 2019 4:32 PM EST

Many traders have a theory about what might come of the China trade talks with Washington, but any bet is a gamble.

China's Moves to Stop Buying U.S. Tech Aren't Going Away - But They Have Limits

Eric Jhonsa
Dec 9, 2019 3:16 PM EST

Beijing is intent on reducing its dependence on American hardware, software and chips. But reducing it and eliminating are two very different things.

Taking a Hit From Pot Stocks? Harvest Tax Losses Into an ETF

Debra Borchardt
Dec 9, 2019 2:30 PM EST

As the year winds down, many frothed up stocks of cannabis companies dipped -- here's a way to roll up your investments going into the new year.

Enphase Energy Is My 'Stock of the Week'

James "Rev Shark" DePorre
Dec 9, 2019 1:58 PM EST

ENPH has had huge, quick growth.

I See a Good Trade in Store for Macy's

Timothy Collins
Dec 9, 2019 1:31 PM EST

Sure, many other big box retailers and niche retail names look better for investing, but M offers some fantastic volatility for a play.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:02 AM EST BOB LANG

    Added Some Peleton

    This stock is starting to gain some traction, the ...
  • 01:06 PM EST CAROLYN BORODEN

    MRK and LVS Targets Coming Up

    View Chart » View in New Window »  LVS View C...
  • 12:01 PM EST BOB LANG

    Rolling Up Apple

    Just the other day we added some Apple calls on th...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login