The high-tech sector in the United States, after a sharp rise in 2012-2013, has significantly slowed down its growth rate. Last year, the total growth of shares of the Technology sector in the US was only 7.2%. For comparison, the growth of the S&P500 index as a whole was about 11%. It looks like the new IT boom in the American market is coming to an end. However, unlike the dot-com bubble that burst in the early 2000s, this time the situation is somewhat different - this sector provides very good profitability and high dynamics of the main financial indicators. Moreover, the shares of most large companies in the sector continue to show very positive dynamics.
One of these companies is Intel Corp, the world's largest manufacturer of PC processors, which is also traded on the St. Petersburg Stock Exchange under the ticker INTC. companies in 2014 jumped by almost 39% and exceeded $160 billion. And this is not surprising, since the giant’s financial indicators have been steadily increasing throughout the past year.
What does Intel do?
The main activity of the company is the production of microprocessors for PCs and various kinds of gadgets, as well as its own consumer electronics. In total, the company is divided into four areas: PC Client Group, Data Center Group, Mobile and Communications Group and Internet of Things Group. Up to 85% of total revenue (or about 47.5 billion dollars per year) comes from the first two areas. Currently, the company's share in the global microprocessor market is over 80%, and its closest competitor is the American microprocessor manufacturer AMD. Over the past year, two key factors supporting the company's financial performance were the growth in sales of processors and PC components in the Chinese market (mainly due to the rapid development of local PC manufacturers such as Lenovo) and the growth in sales of components for tablets and smartphones (mainly due to good sales dynamics the world's largest player in the market - South Korean Samsung).
Main development trends of Intel
Back in 2012, when it became finally clear that the global PC was experiencing a decline and was being replaced by more convenient and mobile-to-use tablet computers and partially PCs, and Intel’s revenue came under pressure because of this (for 2012-2013, the total decline in revenue was 4.9%, and net profit and by almost 30% to less than $10 billion), the company’s management decided to connect to the growing global market for tablet computers and smartphones. Albeit with a slight delay, this strategy worked - already last year, income grew again, albeit very moderately (within 6%). At the same time, the largest increase in revenue occurred in the Data Center Group segment, responsible for the production of server processors - the growth in revenue from this area averaged about 20%.
At the same time, the company does not intend to lose ground in its traditional market of PC processors, despite the not very positive dynamics of global sales of personal computers. However, it is the segment of tablets and smartphones that is becoming increasingly important for the company - last year the number of sold processors and other components for tablets alone exceeded 47 million, which turned out to be even better plans the company itself. At the same time, the Mobile and Communications Group segment is still an unprofitable business area - over the past quarter, the total from this area collapsed almost 7 times to $202 million.
Financial indicators
The company's financial results show positive dynamics. In 2014, total revenue amounted to $55.9 billion, which is a record figure in the entire history of operations, and reached $11.7 billion. These figures are respectively 6% and 22% more than for the same periods in 2013. These strong results are mainly due to increased sales of processors for mobile devices(primarily tablets). Considering that global sales of tablet computers are growing by an average of 35-40% per year (in 2014 alone, tablet sales jumped by almost 39%), this is an unconditional positive factor for the company, since it will allow us to count on further sales growth, and accordingly, income growth.
Fundamental indicators are generally good. The debt burden is quite low - the Debt/Equity ratio, which determines the ratio of debt to own funds, is 0.24. Moreover, over 90% of the company's debt is for a period of more than 1 year. At the same time, profitability indicators are significantly higher than the sector average. So, equity ROE is 18.4%, average ROI is 12.8%, and return on assets ROA is about 11.6%. For example, for AMD, similar figures are 9.6%, 3.6% and 1.2%, respectively. Thanks to such strong financial results, the company's shares also showed positive dynamics - in 2014 they jumped by almost 38% and reached $36.3 per share. For comparison, the entire Semiconductor – Broad Line sector, in which Intel shares are traded, jumped by almost 39% on average, but the company’s main competitor (AMD)’s shares fell by more than 26% over the past year.
Is there potential for growth?
The company's P/E ratio is about 15.81, while the Semiconductor - Broad Line sector this indicator is 22.73, and according to this indicator, the growth potential of the company's shares is up to 44%. At the same time, the P/Sales ratio for the company and the sector is 2.91 and 2.7, respectively, and the indicator of the ratio of market capitalization to book value of assets P/Book is 2.88 and 3.6. Based on these data, Intel shares have significant potential for further growth.
To summarize, we can say that Intel as a whole managed to overcome the negative environment in its financial performance in 2012-2013, associated with the decline in the global PC market. Therefore, if there are no additional negative trends, in the medium and long term the company's shares will be very attractive for investment.
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An American corporation that produces a wide range of electronic devices and computer components, including semiconductors, microprocessors, system logic sets (chipsets), etc. The company's headquarters are located in Santa Clara, California, USA. The company was founded by Robert Noyce and Gordon Moore in 1968. In the 1990s, the company became the largest manufacturer of processors for personal computers; in 2008, it occupied 75% of this market. The Pentium and Celeron series of processors are still the most common in the world. Intel has made significant contributions to the development of computer technology. Almost 100% of the company's shares are in free float stock exchanges Oh. Market capitalization as of mid-June 2008: $128.8 billion. The main buyers of the company's products are personal computer manufacturers Dell and Hewlett-Packard. On December 16, 2009, the US Federal Trade Commission (FTC) filed a lawsuit against Intel. The commission accused the corporation of “through pressure, bribery and threats” forcing PC manufacturers to refuse to cooperate with competitors.
Opportunities for a trader
The company's shares have long slowed down in growth. Their dynamics are mainly determined by the general weather on the stock market. The instrument is interesting for purchases at the beginning of a bull market and for sales in a bear market. Volatility is slightly higher than that of the major indices.
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