BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F $ BUY December 3, 2017 BUY RATING SINCE 11/30/2010 TARGET PRICE $51.79 BUSINESS DESCRIPTION Intel Corporation designs, manufactures, and sells computer, networking, and communications platforms worldwide. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 28.51 29.22 6.37 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 2.35 7.17 4.13 Net Income 33.68 33.59 9.09 EPS 36.23 34.90 10.84 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 19.28 21.63 13.41 Q3 2016 16.19 14.41 11.79 Q3 2015 19.77 24.50 12.91 P/E COMPARISON Sector: Technology Sub-Industry: Semiconductors Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $51.79 53 50 48 45 43 40 38 35 33 30 28 250 0 15.68 EPS ANALYSIS¹ ($) 41.95 Ind Avg 25.45 S&P 500 RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, compelling growth in net income, attractive valuation levels and good cash flow from operations. Although no company is perfect, currently we do not see any significant nesses which are likely to detract from the generally positive outlook. HIGHLIGHTS 's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 2.4%. Growth in the company's revenue appears to have helped boost the earnings per share. Q2 0.27 Powered by its earnings growth of 36.23% and other important driving factors, this stock has surged by 29.22% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Q1 0.41 Q2 0.55 Q3 0.64 2015 Q4 0.74 Q1 0.42 Q3 0.69 2016 NA = not available NM = not meaningful Q4 0.73 Q1 0.61 Q2 0.58 Q3 0.94 2017 1 Compustat fiscal year convention is used for all fundamental data items. The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry average. The net income increased by 33.7% when compared to the same quarter one year prior, rising from $3,378.00 million to $4,516.00 million. Net operating cash flow has slightly increased to $6,264.00 million or 8.78% when compared to the same quarter last year. In addition, has also modestly surpassed the industry average cash flow growth rate of 7.89%. PAGE 1
$ PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -10% 70% STM UNFAVORABLE 20% QCOM NXPI EBITDA Margin (TTM) NVDA AVGO MCHP TXN MU FAVORABLE ADI TSM 70% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $20.3 Billion and $209.9 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -10% 70% AVGO ADI NVDA UNFAVORABLE 0% STM MCHP QCOM Earnings Yield (TTM) TXN TSM NXPI FAVORABLE MU 12% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.4% and 63.9%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US semiconductors and semiconductor equipment industry is known for its technological advancements. The semiconductor market includes companies that manufacture and sell integrated circuits and discrete semiconductor devices. The semiconductor equipment market includes companies that manufacture and sell equipment for the production of semiconductor devices. About 5,000 companies operate in this industry, which has approximate annual revenue of $150 billion. The top 50 companies hold more than 70% of total market share. Major players are Intel (), Texas Instruments (TXN), Qualcomm (QCOM), Micron Technology (MU), and Advanced Micro Devices (AMD). The industry is cyclical and subject to supply/demand fluctuations and price erosion. After experiencing a downturn during the last recessionary period, the semiconductor market is building back on renewed demand. Demand for semiconductor products is indirect and driven by sales of personal computers, cell phones, consumer electronics devices, and other electronic equipment. The industry is capital-intensive and requires significant investments to advance technology and reduce manufacturing costs. Research and development expenses form a major part of capital expenditure and the industry spends over $15 billion annually. The industry is subject to various environmental regulations related to pollutant emissions, waste-water discharges, and the use of hazardous substances. The European Union s directives, such as the Restriction of Use of Certain Hazardous Substances and the Registration, Evaluation, Authorization, and Restriction of Chemicals are relevant to the manufacturing process. China, which represents the world s second largest semiconductor market and is a major importer of US products, also restricts the use of hazardous substances in electronic products. Although the industry is the second-largest exporting industry in the US, its global market share in chip production has eroded due to insufficient research funding, workforce challenges, and foreign incentives. The demand pattern has shifted production to low cost substitutes and shifted the demand centers to China, Taiwan, and the rest of Asia. There has also been a lateral shift of capital as research and development investments move away from the US to Asia. PEER GROUP: Semiconductors & Semiconductor Equipment Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 44.84 209,851 15.68 62,082.00 13,850.00 QCOM QUALCOMM INC 66.34 97,796 40.21 23,231.00 2,466.00 TXN TEXAS INSTRUMENTS INC 97.29 95,885 22.73 14,625.00 4,385.00 MU MICRON TECHNOLOGY INC 42.39 48,886 9.81 20,322.00 5,089.00 NXPI NXP SEMICONDUCTORS NV 113.39 38,443 19.72 9,240.00 1,982.00 ADI ANALOG DEVICES 86.11 31,743 41.60 5,107.50 727.26 STM STMICROELECTRONICS NV 22.62 20,597 33.26 7,740.00 606.00 TSM TAIWAN SEMICONDUCTOR MFG C 39.60 205,369 19.04 30,404.04 10,792.45 MCHP MICROCHIP TECHNOLOGY INC 86.99 20,347 34.80 3,721.31 603.83 NVDA NVIDIA CORP 200.71 121,630 49.80 8,976.00 2,582.00 AVGO BROADCOM LTD 277.94 113,394 207.42 16,928.00 528.00 The peer group comparison is based on Major Semiconductors companies of comparable size. PAGE 2
$ COMPANY DESCRIPTION Intel Corporation designs, manufactures, and sells computer, networking, and communications platforms worldwide. The company operates through Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Intel Security Group, Programmable Solutions Group, and All Other segments. Its platforms are used in notebooks, 2 in 1 systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, and mobile communication components; enterprise, cloud, and communication infrastructure; and retail, transportation, industrial, video, buildings, and other market segments. The company offers microprocessors that processes system data and controls other devices in the system; chipsets, which send data between the microprocessor and input, display, and storage devices, such as keyboard, mouse, monitor, hard drive or solid-state drive, and optical disc drives; and system-on-chip and multichip packaging products that integrate its central processing units with other system components onto a single chip. It also offers NAND flash memory products primarily used in solid-state drives; security software products that secure computers, mobile devices, and networks; programmable semiconductors and related products for communications, data center, industrial, military, and automotive market segments. In addition, the company develops computer vision and machine learning-based sensing products, mapping and driving policy technology solutions for advanced driver assistance systems, and autonomous driving technologies. It serves original equipment manufacturers, original design manufacturers, cloud and communications service providers, and industrial, communications, and automotive equipment manufacturers. The company was founded in 1968 and is based in Santa Clara, California. 2200 Mission College Boulevard Santa Clara, CA 95054 USA Phone: 408-765-8080 http://www.intel.com Employees: 106000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 90% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 4.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 80% of the stocks we monitor. Solvency 5.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. Income 4.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
$ Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. has average liquidity. Currently, the Quick Ratio is 1.13 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow. 0.86 Q4 FY17 3.25 E 2017(E) 3.31 E 2018(E) During the same period, stockholders' equity ("net worth") has increased by 12.19% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. INCOME STATEMENT Net Sales ($mil) 16,149.00 15,778.00 EBITDA ($mil) 7,173.00 6,762.00 EBIT ($mil) 5,118.00 4,834.00 Net Income ($mil) 4,516.00 3,378.00 STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 17,504.00 17,769.00 Total Assets ($mil) 127,088.00 112,217.00 Total Debt ($mil) 31,619.00 27,600.00 Equity ($mil) 71,806.00 64,001.00 PROFITABILITY Gross Profit Margin 74.70% 75.02% EBITDA Margin 44.41% 42.85% Operating Margin 31.69% 30.64% Sales Turnover 0.49 0.52 Return on Assets 10.89% 9.23% Return on Equity 19.28% 16.19% DEBT Current Ratio 1.60 1.80 Debt/Capital 0.31 0.30 Interest Expense 267.00 216.00 Interest Coverage 19.17 22.38 SHARE DATA Shares outstanding (mil) 4,680 4,739 Div / share 0.27 0.26 EPS 0.94 0.69 Book value / share 15.34 13.51 Institutional Own % NA NA Avg Daily Volume 25,979,242 21,993,107 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
$ RATINGS HISTORY Our rating for has not changed since 10/7/2010. As of 11/30/2017, the stock was trading at a price of which is 5.2% below its 52-week high of $47.30 and 34.9% above its 52-week low of $33.23. 2 Year Chart BUY: $34.77 2016 $50 $40 $30 MOST RECENT RATINGS CHANGES Date Price Action From To 11/30/15 $34.77 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. The current P/E ratio indicates a significant discount compared to an average of 41.95 for the Semiconductors & Semiconductor Equipment industry and a discount compared to the S&P 500 average of 25.45. To use another comparison, its price-to-book ratio of 2.92 indicates a discount versus the S&P 500 average of 3.24 and a significant discount versus the industry average of 5.89. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 15.68 Peers 41.95 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. Price/Projected Earnings 13.56 Peers 22.26 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. Price/Book 2.92 Peers 5.89 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 3.38 Peers 5.73 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 9.14 Peers 19.41 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth 0.29 Peers 0.80 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 34.90 Peers 133.80 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 7.17 Peers 22.13 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5