Intel (INTC.O) released its third quarter financial report for 2021 after the market on October 21, Eastern Time. The company's stock price performed poorly this year. Intel's stock price fell all the way after hitting a historical high of $67.63 in April, and has continued to fluctuate in narrow range since July. The current stock price level is almost the same as the same period last year (October 2020). Unfortunately, last Friday (October 22), the US stock technology sector plummeted, and Intel's stock price closed down 11.68% on the same day, which was a tragic situation.
compared with peers, , which measures the performance of the US semiconductor sector, , Philadelphia Semiconductor Index , has increased by about 50% in the past year (October 2020 to present), S&P 500 Index (SPX.GI) has also risen by about 35% in the past year (October 2020 to present), and Intel's stock price significantly underperforms the industry and market .
. According to the third quarter financial report this year, Intel's net profit increased by nearly 60% year-on-year, but the after-hours-day stock price fell by nearly 9% (author's note: US stocks have after-hours trading time).
"chip shortage" this year is the theme of the technology industry. Why did Intel's stock price fall sharply after the day of the financial report being released? The company's stock price has underperformed the industry and the market in the past year. Why are investors not optimistic about Intel's prospects?
(The following data sources are all public data released based on the company's financial report, GAAP is the US General Accounting Standard)
What are the highlights of this quarter's financial data?
In 2021Q3, Intel's net profit was US$6.823 billion, a 60% increase from US$4.276 billion in the same period last year; earnings per share was US$1.67, a 64% increase from US$1.02 in the same period last year. Not counting certain one-time items (not in accordance with GAAP), Intel's adjusted net profit in the third quarter was $6.997 billion, a 54% increase from $4.546 billion in the same period last year; adjusted earnings per share was $1.71, a 59% increase from $1.08 in the same period last year.
Intel's third-quarter revenue was US$19.192 billion, a 5% increase from US$18.333 billion in the same period last year. Not counting certain one-time projects (not in accordance with GAAP), Intel's adjusted revenue in the third quarter was $18.087 billion, a 5% increase from $17.266 billion a year ago.
Simply put: In the third quarter of 2021, according to GAAP ( US General Accounting Standards ), the company's revenue increased by 5% year-on-year, net profit increased by 60% year-on-year, and earnings per share (EPS) increased by 64% year-on-year (see the figure below).
This financial report is compared with institutional expectations:
Intel's third-quarter adjusted earnings per share exceeded analysts' previous expectations. 33 analysts had previously expected Intel's adjusted earnings per share of $1.11 (actually $1.67, exceeding expectations).
According to the company, the highlight of this quarter's financial report is: points of business, IOTG's revenue hit a record high, and DCG and Mobileye businesses hit a record high in the third quarter.
From the financial report data (see the figure above), IOTG grew by 54% year-on-year, reaching US$1 billion in 2021Q3, which is the fastest growing part of the company's business. In addition, Mobileye's business also grew strongly, up 39% year-on-year.
company said in its financial report that its third-quarter revenue was mainly due to the strong recovery of DCG's corporate segment and IOTG. has increased demand as the epidemic gradually eases and the economy recovers.
Why do IOTG, DCG and Mobileye have performed outstandingly?
Let’s first understand what these businesses do. According to the company's description of the industry business line,
1, DCG includes workload optimization platforms and related products designed for cloud service providers, enterprises and governments, and communication service provider market segments. In 2021, DCG includes the performance of Optane's memory business.
2, IOTG includes high-performance computing solutions for target verticals and embedded applications in market segments such as retail, industry, healthcare and vision.
3, Mobileye includes the development of sensing, data analysis, positioning, map mapping and driving strategy technologies based on computer vision and machine learning for advanced driving assistance system (ADAS) and autonomous driving.
Let me briefly summarize:
1, DCG association concept: cloud concept (such as cloud computing, etc.), Optane memory .
2, IOTG association concept: it is obviously for corporate users, involving popular sub-sectors such as industry and health care, and is related to the Internet of Things.
3, Mobileye related concepts: machine vision, autonomous driving, this needs no explanation, one of the most popular concepts this year.
In this way, the high growth of these businesses will be known.
and Intel's CCG (The Client Computing Group) business revenue fell by 2% year-on-year. Intel pointed out that the decline in revenue in this business is mainly due to the decline in personal computer sales, and the decline in personal computer sales is in turn caused by price increases caused by chip shortages.
Intel CEO (CEO) Pat Gelsinger said that Intel is currently in the worst situation and that the situation is expected to gradually improve every quarter next year. Regarding the chip shortage, he pointed out that the semiconductor crisis will not end until 2023.
At the same time, Pat Gelsinger also expressed some prospects for the future. “The demand for semiconductor in the third quarter is even more prominent, and Intel has a unique breadth and scale in this regard to maintaining its industry leadership. As we begin to deliver on our commitment to IDM2.0, we will continue to focus on execution. Our new wafer factory has broken ground and we unveiled an acceleration path to regaining the leading position in process performance and demonstrated the most compelling architectural innovations we have in a decade. We also announced that we have won important customers in each of our business areas,” Intel CEO Pat Gelsinger said in his financial report: "Although we are still in the initial stage of this journey, I see huge opportunities ahead, and I am extremely proud of the progress we have made in achieving this opportunity."
If we do not advance, we will retreat
mentioned earlier that Intel's CCG business fell 2% year-on-year, and the decline in revenue was mainly caused by the decline in personal computer sales. Compared with mobile phones, the PC industry has always been considered to have almost stagnant growth. , and Intel started with CPU chip. CCG, as its main business structure, is crucial to its profit development trend.
investors have been losing interest in Intel in the past year, mainly because major businesses such as CCG are stagnant; in addition, while TSMC (TSM.N) mass-produces 5nm process, Intel is still "squeezing toothpaste" on the 10nm process, and gradually losing market share, including major customers such as Apple (AAPL.O). In addition, Microsoft (MSFT.O) said it will also develop its own chips.
According to the recent press conference of Apple , Apple removed Intel's chip from its computer. Apple announced a more powerful self-developed Mac processor and comprehensively upgraded the MacBook Pro laptop.
Apple said at the 2021 fall "Unleashed" event held on October 18, Eastern Time that the new chips are named M1 Pro and M1 Max chips, which is 70% faster than the previously launched self-developed chip M1. It is reported that the M1 Pro is equipped with a 10-core CPU, including 8 high-performance cores and 2 high-performance cores, while the GPU has 16 cores, and the graphics processing performance is up to 2 times higher than that of M1. The M1 Max is also equipped with a 10-core CPU and a GPU of 32 cores. The graphics processing performance is up to 4 times higher than that of M1. Let’s take a look at Apple’s promotional words for its own chips (see the part that I circled in the picture below): It’s simple and clear, you can understand it at a glance!
Apple's new chip is intended to replace the high-end chips Intel provides for MacBook Pro and other high-end Mac computers. Apple has previously stated that it will complete the transformation from Intel to self-developed chips by 2022.As one of Intel's core businesses,
CPU chip has lost Apple as a big customer. It is conceivable how much impact it will have on the company. does not have an absolute advantage in technology. Anyway, Intel's CPU performance "toothpaste squeeze" has not been a year or two, but this time the company seems to be a little anxious. In this financial report, it introduced in detail the next generation CPU architecture code-named "Alder Lake" (author's note: Core 12th generation CPU).
company said, "This is our first CPU with two new generation x86 core performance hybrid architectures", and said, "Our first-class GPU architecture (author's note: GPU is a graphics processing chip, also known as a display chip) has the highest computing density Intel has ever seen, and can accelerate AI, HPC and advanced analytics workloads." The author searched the information and found that Intel's 12th-generation Core Alder Lake-S desktop-level processor will be released at 9:00 Pacific time on October 27 (0:00 PM Beijing time on October 28), including the K series and KF series, and will release the Z690 motherboard together. However, some netizens said that they were probably "smashed" by their competitor AMD again.
Speaking of the love and fight between Intel and AMD, the two chip giants have too long history and too many memes, so I won’t tell stories. Judging from the stock prices of the capital market alone, after checking the stock prices of Intel and AMD (Super Micro Semiconductor, Stock Code: AMD.O) after nearly a year (October 2020 to the present), the stock prices of Intel and AMD (Super Micro Semiconductor, Stock Code: AMD.O) have found that the overall trend of AMD's stock price is upward, steadily over Intel, while Intel continues to fluctuate at a low level. From the perspective of stock price performance, AMD, which was laughed at by domestic netizens as "agricultural enterprises", has really "turned over". You should know that this was once the goal that AMD has been working hard on.
(Author's note: Speaking of the causes of AMD's "agricultural enterprises", there are many versions circulating. The author excerpts two versions for you to smile:
1. At the time, AMD's product HD6970 radiator and external power supply conflict, AMD adopted the practice of manually polishing off a corner of external power supply. Therefore, every HD6970 was unique at that time. This move was quite farm-style, so the name of agricultural enterprises was very prosperous. From a "technology-intensive enterprise", it suddenly changed to " labor-intensive enterprise ";
2. AMD once named its products, and the Chinese translation name is translated as "bulldozer, pile driver , and road roller". They are all agricultural machinery~ The key is PPT's ambition, but the product performance was crushed by Intel at the time, which was really hard to describe)
In addition, like the entire industry, Intel is also facing the impact of chip shortage and supply chain blockage. In June this year, the company announced that the next generation of " Xeon " server processor will be postponed to the first quarter of 2022, and its stock price fell by more than 20% that week.
But the good news is that the company stated in its quarterly financial report that "by the end of the year, all major cloud service providers will provide services based on the third-generation Intel Xeon scalable processors (Ice Lake architecture)."
In summary, Intel's main business CCG has stagnated, losing important customers such as Apple, and facing intensified industry competition (from TSMC, AMD, etc.), which has shaken investors' confidence in the company's development trend.
In addition to the financial report, Intel has also recently reported that negotiations on an acquisition case have broken down. According to China Fund News, the negotiations between Intel Intel and SiFive Inc broke down because the two companies were unable to reach an agreement on financial terms, which intends to find external funds and regard the initial public offering (IPO) as a long-term goal.
Previously, Intel was rumored in June this year that it was discussing the acquisition of chip design company SiFive.
The stock price fell after the market, what do institutions think?
or above may be the reason for the company's after-hours-term stock price decline on the day after the release of this quarter's financial report.
However, the author found that inquiry of information, the after-hours trading volume of US stocks will not be very high, the liquidity is not strong, and after-hours trading is not a pricing transaction between professional institutions. Anyone can conduct after-hours trading.Based on this, the author believes that the after-hours trading situation on that day may not represent investors' mainstream views on the company.
Let’s take a look at the institutions’ evaluation of Intel, which may be more valuable for reference.
Currently, 13 of the major institutions' ratings for Intel are Buy, 2 Over-allotment, 15 Holds, 3 Low-allotment and 7 Sells. The average rating is Hold (HOLD), with an average target price of US$61.83. However, the author found that there is one fewer institutions with current rating of "hold" than 1 month ago (see the figure below. In the "hold" rating, the current number of institutions is 15, 1 month ago was 16, and 3 months ago was 16).
Morgan Stanley Analyst Joseph Moore lowered Intel's target price from $70 to $67. Moore said he expected to face greater resistance after the company's IT hardware team led by Katy Huberty lowered the industry outlook to caution, especially in the personal computer space, which lowered its forecast for Intel's personal computer revenue. However, he remains "strongly convinced that the company will have a long-term shift" that has led him to continue to maintain an "overweight" rating on Intel stock.
Summary
As a veteran chip company, Intel's net profit increased by 60% year-on-year in the third quarter of this year's financial report, but its stock price fell after the day of the financial report. Investors may express concerns about the company's main business CCG is stagnant, the loss of important customers such as Apple, and the intensification of industry competition. However, most institutions still maintain a positive rating for the company (buy, overweight or hold).
The author analyzed the company's financial report this quarter and found that while maintaining chip research and development, the company is also expanding to new businesses. Such as DCG associated with cloud computing ; IOTG associated with the Internet of Things; and Mobileye related to machine vision and autonomous driving all maintained high growth this quarter. The author believes that the company's focus in the future can be paid attention to the development of new businesses, which is closely related to the development of downstream industries such as 5G, the Internet of Things, cloud computing, and autonomous driving.
Author: Xu Tengyao
