Intel is a good investment and a bad trade, this investor says

Likely in the long term, says Scotia Wealth’s Andrew Pyle, but for short term traders you might want to look elsewhere.

“The tech sector has been on fire, with the NASDAQ hitting another record high [on Tuesday]. I still like Intel right now,” says Pyle, portfolio manager for Scotia Wealth Management, who spoke to BNN Bloomberg on Wednesday.

After staying range-bound for a good year and a half, Intel broke out last fall to post a 25 per cent return for 2019, while so far in 2020 the stock is already up ten per cent and is now hanging around $66-$67 in recent weeks. (All figures in US dollars.)

“We seem to be having a bit of an issue in getting the stock up to the $70 range,” says Pyle. “We’re seeing a bit of consolidation right now which is a little bit different from what we’ve seen from some of the other high-fliers in the tech sector,” he said. “Having said that, I still think the fundamentals for Intel are good for a long-term play.”

“If we’re looking at five years out or more I think these levels are probably still attractive. For a short-term trade, I’d probably say we’re a little bit pricey right now,” Pyle said.

Intel’s share price got a nice boost near the end of January on the company’s fourth quarter earnings which surprised analysts with better-than-expected top and bottom line results.

Intel’s revenue climbed eight per cent year-over-year to $20.21 billion whereas analysts were calling for $19.23 billion, while earnings came in at $1.52 per share excluding certain items compared to the Street’s estimate at $1.25 per share.

The company saw just two per cent growth in its Client Computing segment but posted a whopping 19 per cent increase in its Data Center Group which manufactures chips for computer servers, with the rise being attributed to more business in cloud computing, especially by the big names in the field, the so-called hyperscale companies such as Amazon, Microsoft, Alibaba and Baidu.

Looking ahead, Intel management has called for 2020 revenue of $73.5 billion compared to 2019’s $72.0 billion.

“In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” said Bob Swan, Intel CEO, in the fourth quarter press release. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns.”

Intel is facing rising competition across many of its businesses from Advanced Micro Devices, among others, which has been gaining market share from Intel. AMD’s share price rose 148 per cent last year and has kept up the pace so far in 2020 by climbing 27 per cent so far.