Intel Corporation: A Surprising Reason to Like INTC Stock

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In the red-hot tech sector, personal computers (PCs) are not really in the spotlight these days. With mobile applications, 5G, the Internet of Things (IoT), and cloud computing presenting long-term growth themes, who cares about the decades-old PC industry?

Well, that industry has served as a surprisingly strong catalyst for Intel Corporation’s (NASDAQ:INTC) business lately.

Intel was responsible for developing the first x86 series of microprocessors found in most computers—so the company was instrumental to the growth of the PC market in its early days. But as PC adoption seemed to reach a plateau in the mid-2010s while smartphones and tablets continued to flourish, the PC market no longer seemed like a growth driver for Intel Corporation.

Until now.


You see, Intel recently reported its earnings. The report showed that, in the fourth quarter of 2020, the company’s Client Computing Group—which represents its PC-centric business—earned $10.9 billion of revenue. The amount represented an impressive nine-percent increase year-over-year. (Source: “Intel Reports Fourth-Quarter and Full-Year 2020 Financial Results,” Intel Corporation, January 21, 2021.)

Notably, Intel’s PC CPU unit volume rose 33% year-over-year in the fourth quarter, driven by record laptop sales.

In full-year 2020, Intel’s Client Computing Group revenue totaled $40.1 billion, up eight percent from 2019.

The stock market, however, did not seem to like the news. In the trading day after Intel’s earnings release, INTC stock fell 9.3%.

And it’s not like the company missed the headline numbers from Wall Street. Analysts expected Intel Corporation to report $1.10 of earnings per share on $17.5 billion of revenue for the fourth quarter. The actual results were much better: Intel reported an adjusted profit of $1.52 per share on $20.0 billion in sales.

There were, of course, some reasons behind the drop in Intel stock. While the top- and bottom-line numbers were better than Wall Street’s estimates, they were largely unchanged from a year earlier (revenue was actually down by about one percent).

Some of Intel Corporation’s other segments experienced weakness in the fourth quarter, too. But for the year, they remained resilient. Notably, the company’s Data Center Group, Non-volatile Memory Solutions Group, and Mobileye—along with its PC-centric Client Computing Group—all achieved record full-year revenue in 2020.

For the company as a whole, Intel’s revenue totaled $77.9 billion last year, marking a new all-time high. Note that 2020 was the fifth consecutive year in which the company achieved record revenue.

In the earnings conference call, Intel’s chief financial officer, George Davis, said, “We see continuing strong demand for notebook PCs in Q1, up significantly year-over-year and expect desktop volumes to be down year-over-year.” (Source: “Intel Corporation’s (INTC) CEO Bob Swan on Q4 2020 Results – Earnings Call Transcript,” Seeking Alpha, January 22, 2021.)

The reality is that the pandemic has not ended, and many people continue to work and attend school from home. The strong demand from the PC market could continue to benefit the chipmaker.

Intel Corporation (NASDAQ:INTC) Stock Chart

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Analyst Take

Intel stock has had a very choppy ride over the past year. But investors should keep in mind that, as an established chipmaker, Intel Corporation delivers returns to shareholders through regular dividend payments.

In fact, the company recently announced that it’s raising its quarterly dividend rate from $0.33 per share to $0.3475 per share. These are cash payments that shareholders get no matter where the company’s stock price is.

Bottom line: INTC stock may not be a hot ticker, but there are still plenty of reasons to like the decades-old chipmaker.