I have suggested that Intel is on sale at bargain basement prices given it’s steady, if uninspiring, performance over the past decade. Revenues have grown a paltry 4% per year, while earnings and EPS have grown by by 7.3% and 9.9% respectively. Part of that discrepancy is explained by Intel putting its healthy cash flow toward the steady repurchase of shares, as well as a healthy return of dividends to shareholders.
Revenues in 2012 = $53.3 billion
Revenues in 2016= $62.8 billion
Revenues in 2021 = $79.0 billion
Earnings in 2012 = $11 billion
Earnings in 2017 = $16.8 billion
Earnings in 2021 = $22.3 billion
Share count in 2012 = 4.9 billion
Share count in 2017 = 4.7 billion
Share count in 2021 = 4.1 billion
EPS in 2011 = $2.13
EPS in 2017 = $3.47
EPS in 2021 = $5.47
So in 2011 you could have bought all of INTC for $99 billion @ $20/sh. Since then they have payed out $49 billion in dividends and bought back ~ $25 billion in stock for a total of $74 billion returned to investors. A private investor would have recouped 75% of their invested capital in ten years, pocketing $8-10 mil in fcf for the foreseeable future.
So, we have a company that is returning capital to shareholders while growing both top and bottom line in the face of its ever-imminent collapse. A collapse that has been predicted in each and every of the past ten years, never mind the fact that they have grown revenues and earnings by 48% and 100% respectively over that time period. You can buy these increased revenues and earnings at the same price available to you five years ago, a mere 9 times current earnings.
The contrary thesis is that Intel is a slow moving brontosaurus in a landscape increasingly dominated by more agile raptors. To make maters worse, they are choosing to redirect all of that FCF back into a risky venture involving the establishment of Intel as a domestic chip foundry. They have committed at least $20 billion to this effort.
Many pooh pooh this pivot as a fool hardy venture into a low margin business, however I wonder if the timing of this is not perfect?
We are seeing the wheels coming off the great globalization bullet train of the past half century, with rising concerns about the dependency of the American and European economy on east Asian manufacturers. The chip manufacturing business in particular has been identified as not just as a bottleneck in the global supply chain crisis, but also a geopolitical risk in an increasingly fractious geopolitical environment.
I believe Intel is setting itself up as the go to supplier of chips for the US economy well into the 21st century, and I believe that current concerns about the economic and political risks of reliance on one region, or one country, for our supply of vital capital inputs is too great a risk for the American economy and American political leadership in the world.
So on both a value basis, and on a strategic basis, I believe that Intel will be a great investment going forward, especially at these depressed prices.
PP