While 2020 has been an incredible year for many tech stocks, semiconductor giant Intel (NASDAQ:INTC) has really struggled. Shares are down over 32% from the high, as the company has started losing market share to competitor Advanced Micro Devices (NASDAQ: AMD) in the never-ending war for performance. With several big mergers now in the works, the competition will only intensify.
Investors may not want to be so quick to rule that Intel is down for the count. The company has a lot of work to do to match the competition's innovation, but the semiconductor industry is still growing rapidly as more and more devices require powerful computing capability.
On the Oct. 23 edition of "The Wrap" on Motley Fool Live, host Jason Hall and Motley Fool analyst Jason Moser discuss what's going on with Intel and how investors should think about the company as an investment right now.
Jason Hall: Right now, AMD has a lead in processors. They've taken a competitive position, and Intel's taken a bit of a beating.
Jason Moser: Yeah. We were talking about this earlier today on Motley Fool Money and just because of the service in Next-Gen Supercycle that I'm running. Intel's been a company that's been on our radar, at least learn more about it and follow along. I think you're right. They are losing share. They're becoming a little bit less part of the conversation. Part of it has to do, they were never known for their mobile prowess. They kind of missed the mobile generation.
Jason Hall: They missed the boat big time. They did.
Danny Vena: Completely.
Jason Moser: It's always been a PC-centric story. What they decided to do at some point or another, they felt like, "Okay. We need to make this shift to become more of a data-centric company and focus more on the datacenter because they could see that's where things are going. Cloud computing and edge computing, the value in datacenters and getting all of this data to and fro, there's a lot of value there. They're making that effort to become a little bit more data-centric, which is fine. But to your point, that data-centric revenue was eight-and-a-half billion dollars, that was down 10% year-over-year. Just a quarter ago, it was up 35%. They attribute some of these to pandemic headwinds and whatnot. But when you couple that with the PC department and that essentially those sales were flat, then you add to that the fact that there are seven nanometer chips along with 10 and anything else they want to come up with, everything is getting delayed, getting pushed out, they're not executing. So anytime you're not executing, someone else is going to come in and fill that demand. With companies like, whether it's AMD, we get talk of AMD potentially merging with Xilinx. You've already got NVIDIA talking about they're going to merge with Arm. So Intel, they're being left down the cold here in a number of different ways. It's not to say that their day in the sun is done, there may be a value investment here in the making, but it's certainly understandable the market is pessimist on the stock today.
Jason Hall: I agree. But to that point, here's my take, stepping back and looking at the bigger picture. Thinking about each person is an individual investor and what's appropriate to help you meet your financial goals, here's what I see with Intel. This isn't a struggling retailer. They're still making good money, but it's in a bad business that's in decline. There is still huge growth in microprocessors. The amount of silicon that's going to get deployed over the next 10 years is going to be double what was deployed over the 10 years before. I think it's OK to be in a weak. If you're going to be going through a bit of a transitional period, if you're in a great growth business, it's OK. I think Intel is going to remain really, really relevant. I think they spend enough on R&D and they have enough of a legacy of innovation that eventually they're going to catch up. I think they're going to catch up. It may take two years at this point to catch up, but they're going to remain relevant. Right now, this is a stock that trades for less than 11 times the company's own guidance for 2020 earnings. That's a good value, I think it's a reasonable value, especially when you pair that with a dividend yield, it's about 2.7%. If you're somebody that is looking for a little more stability, a predictable source of recurring income from a company that's still a stalwart and is in a business that has great prospects, an industry that has great prospects, I think Intel is worth a look. This is not a company that's going to grow earnings or revenues 25 or 30% a year from here, but I still think it can be a reliable income investment if that's appropriate for you as an investor. That's kind of where I see Intel right now.