Equity research: Is Intel Stock A Buy Right Now? Here's What IBD Charts Show

 Here is the article. 

Take my notes in the following:

1. In 2019, No. 1 chipmaker by revenue - Intel
2. In 2017 and 2018, No. 1 chipmaker by revenue - Samsung
3. Intel - 15.7% market share in 2019, Samsung 12.% No. 2 vendor Samsung
4. Intel revenue - 0.7% year over year drop, $65.8 billion
5. Total worldwide semiconductor revenue fell 11.9% to $418.3 billion in 2019.

Chipmaking giant Intel (INTC) has had a rough 2020, which has rocked INTC stock. Intel stock climbed earlier this year on improving prospects, but tanked in the coronavirus stock market crash. It bounced back only to fall hard after its last two quarterly earnings reports. Still, some investors may be wondering: Is Intel stock a buy right now?

The Santa Clara, Calif.-based company ruled the personal computer era thanks to its close partnership with Windows software maker Microsoft (MSFT) in what was called the Wintel alliance. But the growth of smartphones and other computing devices diminished its influence.

In 2019, Intel was the No. 1 chipmaker by revenue, research firm Gartner said. It regained the top spot after Samsung took the lead in 2017 and 2018.

Intel had 15.7% market share last year, compared with 12.5% for No. 2 vendor Samsung. Intel's chip revenue slipped 0.7% year over year to $65.8 billion amid a semiconductor industry downturn. Meanwhile, total worldwide semiconductor revenue fell 11.9% to $418.3 billion in 2019.

Intel Stock Fundamental Analysis

On Oct. 22, Intel narrowly beat Wall Street's overall targets for the third quarter, but its data-center chip sales disappointed. Intel stock tumbled 10.6% on the first trading day after the report.

In the September quarter, Intel earnings fell 22% year over year to an adjusted $1.11 a share. It was the first year-over-year decline in quarterly earnings for Intel in over four years. Sales dropped 4% to $18.33 billion.

Intel's PC chip sales rose 1% to $9.8 billion. However, its data-center chip sales fell 7% to $5.9 billion, missing the consensus estimate of $6.22 billion

For the fourth quarter, Intel predicted adjusted earnings of $1.10 a share on sales of $17.4 billion. Wall Street was modeling Intel earnings of $1.06 a share on sales of $17.34 billion in the December quarter. In the year-earlier period, Intel earnings were $1.52 a share on sales of $20.21 billion.

On July 23, Intel delivered better-than-expected second-quarter results, but disclosed a six-month delay for its next-generation processors.

INTC Stock Tanks On Chip Delay

Investors sold off Intel stock after the company disclosed a delay in production of 7-nanometer scale processors. Its shares declined 21% in the week after the news.

The delay puts Intel further behind chip foundry Taiwan Semiconductor Manufacturing (TSM), which is already mass producing chips at 5-nanometer scale. Intel's current state-of-the-art chips are at 10-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter. Smaller circuits translate to faster, more power-efficient processors.

Intel rival Advanced Micro Devices (AMD) has been leveraging Taiwan Semiconductor's advanced process nodes to take market share in processors for PCs and servers.

Intel said it has a "contingency plan" to outsource production of its 7-nanometer chips to a foundry, presumably Taiwan Semiconductor.

Apple, Microsoft Moves Rattle Intel Stock

On June 22, Intel suffered a blow to its reputation when customer Apple (AAPL) revealed that it is moving to its own chips for Mac computers. The switch from Intel chips to Apple silicon will take about two years to complete. Taiwan Semiconductor will make the chips from Apple's designs.

Investment bank Morgan Stanley estimates that Intel was getting 5.8% of its total revenue from supplying microprocessors to Apple.

On Nov. 10, Apple announced its first Mac computers using homegrown processors. Apple claims its M1 chip delivers up to 3.5-times faster central processing unit performance than Intel-based Macs. It said its M1 chip also has much faster graphics performance and better power efficiency.

Intel stock suffered another blow on Dec. 18 when Bloomberg reported that Microsoft is designing its own chips for data-center servers as well as its Surface PCs. INTC stock fell 6.3% on the day the news broke.

Intel Faces Call For Change

Intel was hampered in 2020 by production shortages for PC chips. That allowed a resurgent AMD to gain market share.

Meanwhile, Intel Chief Executive Bob Swan has been working to hone the company's focus by selling off non-core assets. On Oct. 20, Intel announced a deal to sell its Nand memory-chip unit to South Korea's SK Hynix for $9 billion.

On Dec. 29, activist hedge fund Third Point sent a letter to Intel's chairman urging the company to explore strategic alternatives, Reuters reported. Those alternatives reportedly include divesting its chip manufacturing operations and becoming a fabless semiconductor company.

"Intel Corporation welcomes input from all investors regarding enhanced shareholder value," the company said in a news release. "In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal."

RBC Capital Markets analyst Mitch Steves said Third Point's recommendations appear to be the same alternatives that Intel is already considering.

However, Intel would take a gross profit margin hit of 30% or more if it were to outsource chip manufacturing to Taiwan Semiconductor or Samsung, Steves said in a note to clients. He rates Intel stock as underperform.

Intel stock hit a 19-year high of 69.29 on Jan. 24 ahead of the coronavirus stock market correction. INTC stock notched its all-time high of 75.81 in August 2000 around the time of the dot-com bust.

On May 20, Intel stock broke out of a cup-with-handle base with a buy point of 62.23, according to IBD MarketSmith charts. It stayed mostly in the 5% buy zone for a few weeks. But on June 11 it tumbled 6.5%. The next day it fell anew and triggered a stop-loss sell rule, based on IBD trading principles.

Intel stock ended the regular session Dec. 28 at 47.07. In afternoon trading on Tuesday, it was up 5.1%, near 49.50.

Intel stock has a lousy IBD Relative Strength Rating of 5, meaning 95% of stocks have outperformed it in the past 12 months. The best growth stocks typically have RS Ratings of at least 80.

Is Intel Stock A Buy Right Now?

Intel stock is not a buy right now.

INTC stock needs to form a proper base in the right market conditions before setting a new potential buy point.

Plus, Intel needs to show progress in shipping new processors to fend off AMD.

INTC stock ranks No. 21 out of 32 stocks in IBD's Electronics-Semiconductor Manufacturing industry group, according to the IBD Stock Checkup. That means there are much better stocks to investigate in the group.

The chip manufacturing group ranks No. 78 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in top 40 industry groups.

Intel stock has a subpar IBD Composite Rating of 34 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.