One quarter into the new year, my somewhat surprising "top pick" for 2023 is quietly getting the job done, so far anyway.
Intel (INTC) , which was hammered in 2022, is up about 25% year-to-date, with little fanfare. Last year, the stock fell 46.5%, putting it at levels last seen in 2015, and putting it in "value" territory. (Incidentally, I typically shudder when my awesome Real Money editors ask for my "top pick.")
The year did not start off so great, however. On January 26, the company released fourth-quarter earnings per share of $0.10, which badly missed consensus estimates ($0.20). At the time of that earnings announcement, first-quarter guidance was also reduced significantly. Consensus estimates for Q1 had been calling for earnings per share of $0.25, on revenue of nearly $14 billion, well above company guidance of a $0.15 loss/share on revenue of between $10.5 billion and $11.5 billion.
But there was more news to come.
On February 22, the company announced that it was cutting its quarterly dividend nearly 66%, to $0.125 cents from $0.365. The company, which I'd referred to as a "dividend champion" -- Intel had raised its dividend at an 8.1% compound annual growth rate (CAGR) over the past 15 years -- was giving up that moniker in a big way. That announcement was met with a whimper, and had little effect on the share price.
Since then, the shares are up about 29% due to renewed and more upbeat interest in the sector, a handful of analyst upgrades for Intel, and most recently, last week's investor event, which showed some optimism.
INTC now trades at 17x and 12x 2024 and 2025 consensus earnings estimates, respectively. Admittedly, I am indeed looking past 2023; consensus estimates of $0.55 per share imply a price/earnings ratio of 59. I believe the markets are looking past that as well.
