Business Description

Intel is one of the world’s largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It was the prime proponent of Moore’s law for advances in semiconductor manufacturing, though the firm has recently faced manufacturing delays. While Intel’s server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, acquiring Altera, Mobileye, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas.

Recommendation (Dec 2020)

A great business, undervalued at $50 per share.

$50 per share implies that revenue will grow at 0.3% CAGR and NOPAT will shrink by 1% CAGR for the next 10 years. This is implausible and far too pessimistic for Intel.

If we assume that EPS will grow between 10-14% CAGR for 10 years and that INTC will trade at a PE multiple of 13x in 2030, then the implied Investor Return would be between 18-23%.

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