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Intel Corporation (INTC) 4th quarter 2020 earnings report review

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Category: Intel (INTC)
Date: 25 January 2021
Stock price of Intel (INTC) : $56.66
We take a look at the 4th quarter 2020 earnings report of Intel Corporation, one of the world's largest technology firms in order to find out what their stock is worth. For the quarter the group reported revenues of $20 billion and net income of $5.9 billion
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Bob Swan, Intel CEO - Demand for the computing performance Intel delivers remains very strong and our focus on growth opportunities is paying off. It has been an honor to lead this wonderful company, and I am proud of what we have achieved as a team "

More About Intel Corporation

Founded in 1968, Intel’s technology has been at the heart of computing breakthroughs. We are an industry leader, creating world-changing technology that enables global progress and enriches lives. We stand at the brink of several technology inflections—artificial intelligence (AI), 5G network transformation, and the rise of the intelligent edge—that together will shape the future of technology. Silicon and software drive these inflections, and Intel is at the heart of it all.
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Overview of Intel Corp's 4th quarter 2020 earnings report

  • Fourth-quarter revenue was $20.0 billion, exceeding October guidance by $2.6 billion and down 1 percent year over-year (YoY). Full-year revenue set an all-time Intel record of $77.9 billion, up 8 percent YoY.
  • Delivered outstanding fourth-quarter earnings per share (EPS) of $1.42 ($1.52 on a non-GAAP basis, exceeding October guidance by 42 cents).
  • In 2020, Intel generated a record $35.4 billion cash from operations and $21.1 billion of free cash flow (FCF) and returned $19.8 billion to shareholders.
  • Forecasting first-quarter 2021 revenue of approximately $18.6 billion (non-GAAP revenue of $17.5 billion); expecting first-quarter EPS of $1.03 (non-GAAP EPS of $1.10).


Q4 2020 Financial Highlights
                                                                             GAAP                                                                                    Non-GAAP
                                                     Q4 2020         Q4 2019         vs. Q4 2019                                       Q4 2020       Q4 2019        vs. Q4 2019
  • Revenue ($B)                      $20.0               $20.2              down 1%                                           $20.0^           $20.2^         down 1%
  • Gross margin                      56.8%              58.8%             down 2.0 ppt                                   58.4%             60.1%          down 1.7 ppt
  • R&D and MG&A ($B)         $5.4                  $5.0                up 9%                                                $5.4                $4.9             up 9%
  • Operating margin              29.5%              33.6%              down 4.2 ppt                                   31.5%              35.7%         down 4.2 ppt
  • Tax rate                                21.8%               14.4%               up 7.4 ppt                                         21.5%              13.6%          up 7.9 ppt


In the fourth quarter, the company generated $9.9 billion in cash from operations and paid dividends of $1.4 billion.

Additional financial information
  • Revenue: $20 billion (down from $20.2 billion)
    • Revenue declined by 1% over the last 12 month
  • Net income: $5.9 billion (down from $6.9million for the same quarter of the previous year) 
  • Diluted earnings per share: $1.42 (up from $1.58 for the same quarter of the previous year)
  • Diluted weighted-average shares outstanding: 7.61 billion (down from 7.69 billion for the same quarter of the previous year)
  • PE ratio of Intel (INTC): 9.8
  • Cash and cash equivalents: $5.86 billion
    • Cash and cash equivalents per share: $1.42
    • Cash and cash equivalents makes up 2.6% of Intel's current market capital
    • Cash and cash equivalents makes up 3.8% of Intel's total assets
  • Accounts receivable: $6.782 billion
    • Accounts receivable makes up 4.4% of Intel's total assets
  • Total stockholders' equity of Intel:  $81.038 billion
    • Stockholders' equity per share: $19.67
    • So Intel (INTC) is trading at 2.8 times its stockholders equity per share which is  within the expected range of between 2 and 5 times that most firms tend to trade at
    • The average price to book value of firms in the S&P 500 is 4.2​

Intel Corporation  management commentary on their 4th quarter 2020 earnings report

SANTA CLARA, Calif., January 21, 2021 -- Intel Corporation today reported fourth-quarter and full-year 2020 financial results. The company also announced that its board of directors approved a cash dividend increase of five percent to $1.39 per share on an annual basis. The board declared a quarterly dividend of $0.3475 per share on the company’s common stock, which will be payable on March 1 to shareholders of record on February 7.

​“We significantly exceeded our expectations for the quarter, capping off our fifth consecutive record year,” said Bob Swan, Intel CEO. “Demand for the computing performance Intel delivers remains very strong and our focus on growth opportunities is paying off. It has been an honor to lead this wonderful company, and I am proud of what we have achieved as a team. Intel is in a strong strategic and financial position as we make this leadership transition and take Intel to the next level.” 
Business Outlook Intel's guidance for the first quarter includes both GAAP and non-GAAP estimates. Our Non-GAAP measures exclude the NAND memory business, which is subject to a previously-announced pending sale. Reconciliations between GAAP and non-GAAP financial measures are included below.

                                                                                           Q1 2021 GAAP                             Non-GAAP
                                                                                         Approximately                       Approximately
  • Revenue                                                                  $18.6 billion                                $17.5 billion
  • Operating margin                                                      27%                                              30%
  • Tax rate                                                                       14.5%                                            14.5%^
  • Earnings per share                                                   $1.03                                             $1.10

Intel (INTC) stock price chart over the last 5 years

The image below shows the stock price history of Intel over the last 5 years. And its been a good time for Intel stockholders with the stock increasing sharply by 92.6% over the last 5 years. 
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The stock of Intel is trading at close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the short term sentiment and momentum of Intel's stock is neutral at this point in time.
Intel (INTC) stock price chart over the last 5 years
Intel (INTC) stock price chart over the last 5 years

Latest stock valuation of Intel Corporation

So what is Intel Corporation (INTC) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Intel at $72.20 a stock.

We therefore believe the stock of Intel is undervalued at its current price of $56.66

​We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $72.20, thus a good entry point into Intel would be at $65 or below.

Since the stock of Intel Corporation is trading at well below our suggested entry point we rate the stock of Intel as a buy

Next earnings release of Intel Corporation (INTC)

It is expected that Intel (INTC) will release their 1st quarter 2021 earnings report in late April 2021

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