EQUITY RESEARCH Intel Corporation (INTC)
Intel Target Change Options For Pat USA | Semiconductors January 14, 2021 RATING HOLD Key Takeaway PRICE $56.95^ We update our "Focus, Frugality and Fabless" framework originally published Jan 2020, MARKET CAP $239.8B and estimate a move to a fabless model could add $27 to the stock. We assess three PRICE TARGET (PT) $53.00 (FROM $50.00) strategic tracks INTC's new CEO, Pat Gelsinger, could pursue, and believe that a move UPSIDE SCENARIO PT $100.00 to a fabless front-end, integrated manufacturer back-end model would have the highest DOWNSIDE SCENARIO PT $40.00 long-term positive impact to shareholder value. We will assess Gelsinger's plan when it ^Prior trading day's closing price unless is articulated. otherwise noted. FY Dec Updated Focus, Frugality and Fabless Framework. In our Jan 2020 note, we argued that USD 2018A 2019A 2020E 2021E INTC should do three things to increase shareholder value. In this note we update that EPS 4.58 4.87 4.89 4.72 analysis: 1) Focus - we estimate that by divesting all of its memory business, it could FY P/E 12.4x 11.7x 11.6x 12.1x add $0.13 to EPS and $6 to its stock price; 2) Frugality - by driving its SG&A to industry *EPS changes reflect lower estimates and change from GAAP to standards, we estimate it could add $0.78 to EPS and $14 to the stock; 3) Fabless - we non-GAAP estimates estimate that by moving to a front-end fabless model, it could lower R&D by $4bn, CapEx by $10bn, morph into a cash flow and capital return machine that would add $1.36 to EPS Links to Related Research and $28 to the stock. We believe the Focus and Frugal steps could be executed within Jan 20, 2020 Table Set for Change: Focus, six months, but the move to a fabless model could take 2-to-4 years. Frugality, ...and Fabless?
3 Options for Pat. Intel announced that Pat Gelsinger would assume the CEO position Jul 23, 2020 Our Fabless Thesis Now a starting February 15th (see "Gelsinger to the Rescue"). He has yet to articulate his vision Higher Probability Event for INTC, but we think there are one of three paths he could take the company - we examine the pros and cons of each: Aug 03, 2020 A Butterfly Flaps Its Wings in 2005... Option 1: Front End Fabless, Back End IDM. In this option, INTC would move its front end manufacturing to a fabless model, but would continue to operate as an Oct 20, 2020 Finally Ditching Loss-Making integrated manufacturer on the back end. Pros: INTC has among the best back-end Memory...or Not? advanced packaging, assembly and testing (PAT) capabilities in the world, including Oct 19, 2020 Focus (sort of) is WIP, silicon photonics, and given the slowing transistor cost curve, we believe that increased Frugality and Fabless Hopefully Next differentiation in CPUs will come more from PAT and design than from transistor improvements. On the front end, we believe Intel has permanently lost transistor Oct 23, 2020 Would TSMC Take INTC...? leadership to TSMC and by proxy its competitors, and by moving its chip production to Jan 11, 2020 Jef U Graviton ARM CPU TSMC, it would neutralize its transistor deficit and potentially arrest its share loss. Cons: Expert Call + Transcript a move to fabless would likely take 2-to-4 years. If executed properly, we estimate that this could add $27 to the stock. Jan 13, 2021 Gelsinger to the Rescue...?
Option 2: Stay an IDM. Pros: lowest execution risk. Cons: we've argued INTC has Mark Lipacis * permanently lost transistor leadership and appears to be falling farther behind. We would Equity Analyst expect this strategy to translate to continued share loss. (415) 229-1438 [email protected] Option 3: Move to a Fab-lite Model, where it pursues both its own internal leading edge Vedvati Shrotre * development and production, as well as an outsourced model. Pros: keeps the door open Equity Associate for internal manufacturing in the event it catches up to TSMC on the transistor, also, (415) 229-1574 doesn't preclude a move to a fabless model later if it determines it can never catch up [email protected] to TSMC. Cons: this is the most expensive option, that would require it to maintain $4bn Natalia Winkler, CFA * of annual R&D for its own process development, and incur additional R&D expense for Equity Associate its foundry design rules. (415) 229-1511 [email protected]
Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 17 to 23 of this report. * Jefferies LLC / Jefferies Research Services, LLC EQUITY RESEARCH Intel Corporation (INTC)
INTEL (INTC) The Long View | Scenarios Estimates Base Case USD 2018A 2019A 2020E 2021E Rev. (MM) 70,848.0 71,965.0 75,332.0 69,781.0 • Management divests memory • No actions are taken to streamline SG&A costs Previous • Share loss to AMD in desktop and server and NVDA in Consensus EPS 4.58 4.87 4.86 4.68 datacenter with increased pricing pressure Previous • Decline in PC unit shipments • 2021E EPS: $4.72; P/E FWD: 11.2x; Price Target: $53 EPS Upside Scenario Q1 0.87 0.89 1.45A 0.95 • Management moves to a fabless model and Previous streamlines SG&A costs Q2 1.04 1.06 1.23A 1.10 • Better data center and corporate PC demand from Previous COVID-19 driven work-from-home trends • Design wins in datacenter for parallel processing and Q3 1.40 1.42 1.11A 1.27 accelerator products (Nervana, Altera, GPU) Previous • Share gains with new GPU products Q4 1.28 1.52 1.10 1.42 • AMD mis-executes • 2021E EPS: $6.20; P/E FWD: 14x; Price Target: $100 Previous Downside Scenario FY Dec 4.58 4.87 4.89 4.72 COVID-19 outbreak extends beyond 2020 causing Previous • greater than expected demand destruction and supply chain constraints Valuation • Re-accelerating decline in PC unit TAM 2018A 2019A 2020E 2021E • Continued share loss to AMD, NVDA, XLNX and P/Rev 3.4x 3.3x 3.2x 3.4x homegrown solutions from hyperscale players EV/Rev 3.6x 3.5x 3.4x 3.6x • Mis-execution of manufacturing process technology transitions FY P/E 12.4x 11.7x 11.6x 12.1x • Gross margin compression due to under-utilization *EPS changes reflect lower estimates and change from GAAP to non-GAAP estimates • Valuation compression associated with lower growth outlook Market Data • 2021E EPS: $3.66; P/E FWD: 11x; Price Target: $40 52-Week Range: $69.29 - $43.61 | Investment Thesis / Where We Differ Total Entprs. Value $254.4B • Near term, we think INTC's Data Center and Notebook Avg. Daily Value MM (USD) 2,382.84 PC business is benefiting from Work-from-Home trends driven by COVID-19 shelter-in-place restrictions. Float (%) 97.3% • Longer term, we argue there is a tectonic shift in computing toward a parallel model, and as the incumbent with dominant share, we think INTC has the most to lose. • Our "4th Tectonic Shift in Computing" thesis argues that parallel processors will take share from x86 MPUs in the data center going forward. We also expect AMD will take x86 server MPU share from INTC in the data center. | Catalysts • Breakthroughs in manufacturing process technology or chip design. • Corporate PC refresh cycles. • Design wins for its parallel co-processor (Xeon Phi) or artificial intelligence products (Nervana, Movidius). • Adoption and ramp of 3D XPoint memory. • Design wins in Networking products for virtualized network appliances.
January 14, 2021 2 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 1 - INTC Stock Price We estimate that:
120 1) Divesting memory could add $6 to INTC's stock price, $28 100 2) Lowering SG&A to sales-adjusted industry EPS +$1.36 norms could add $14 to INTC's stock price, P/E +2.0x and 80 $14 EPS +$0.78 3) Moving to a fabless manufacturing model Bull Case @ $100 $6 P/E +1.0x could add $28 to INTC's stock price. 60 $53 Fabless Model EPS +$0.13 EPS: $7.0 Base Case - ex P/E +1.0x P/E: 14x 40 Restructuring @ $53 FCF: $27.7bn INTC Stock Price ($) Stock INTC Consensus EPS $4.49 20 P/E 11.8x
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*Note that the sum of the individual restructuring vectors is slightly greater than our bull case
January 14, 2021 3 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 2 - INTC/TSMC Lead on Nodes Historically, Intel would deliver a new transistor every 2 years, which would 45nm 12 Qs TSMC overtook INTC in translate to an 18-to-24 month lead over transistor leadership TSMC 10 Qs During the transition to 14nm, Intel's 32nm 11 Qs historical 8 quarter cadence extended to 11 quarters, and then the transition to 10nm 22nmFF/20nm, 6 Qs took 18 quarters, more than 2x its historical cadence of 8 quarters 16nm FF 6 Qs 9 Qs In July-20, INTC announced yields on its 7nm 14nm/10nm transistor were 12 months behind schedule, and that its 7nm launch would be delayed by 10nm/7nm 6 months to mid-2022, or three years after it 7nm/5mn 5nm/3nm had launched 10nm 8 Qs 8 Qs 11 Qs 18 Qs 12 Qs During its 4.5 year transition to 10nm, TSMC accelerated its transistor cadence to
6 quarters and in 3Q18, TSMC beat Intel to
Jul-11 Jul-21 Jul-22 Jul-23
Jul-10 a smaller transistor for the first time ever,
Jan-10 Jan-11 Jan-22 Jan-23
Jun-24 Jun-12 Jun-13
Apr-16 Apr-17
Feb-09 Feb-20 Feb-21
Oct-15 Oct-16
Sep-17 Sep-18
Dec-11 Dec-12 Dec-23 Dec-24
Mar-08 Mar-18 Mar-19
Aug-08 Aug-09 Aug-20 Aug-19
Nov-13 Nov-14 May-15 May-14 shipping its 7nm node (equivalent to Intel . 10nm), and then its 5nm node (Intel 7nm) in Source: Jefferies estimates, company data 1Q20 Y-axis represents INTC process node / Equivalent TSMC node
January 14, 2021 4 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 3 - AMD Unit Share vs. INTC Gross Margin Chart 4 - AMD Server Unit Share vs INTC GM
F F 35% AMD's share gain o 30% o 70% accelerated after TSMC r INTC GM r e e 30% gained transistor 65% c 25% c leadership in 3Q2018 a a s s 60% 25% t t Desktop Unit 20% Share 25% 55% 20% INTC's loses transistor 59% leadership to TSMC NB Unit Share 15% 50% 15% 14%
45% GM (%) INTC AMD AMD Unit (%)Share AMD AMD Unit (%)Share 19% 10% Server Unit 10% Share 40% Dual Socket 5% Dual Socket 5% Server Unit 14% 35% Server Unit 10% Share Share
0% 0% 30%
2Q06 4Q09 2Q13 4Q14 4Q16 2Q18 2Q05 4Q05 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 4Q13 2Q14 2Q15 4Q15 2Q16 2Q17 4Q17 4Q18 2Q19 4Q19 2Q20
2Q05 4Q09 2Q13 2Q14 4Q17 4Q18 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 4Q13 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 2Q18 2Q19 4Q19 2Q20
4Q21E 4Q20E 2Q21E
2Q21E 4Q21E . 4Q20E . Source: Jefferies, Mercury research and company data Source: Jefferies, Mercury research, and company data
AMD's share gain vs INTC accelerated shortly after INTC lost the The last time Intel lost material server share to AMD, its gross industry's transistor leadership to TSMC in 2018. Since AMD and margins dropped by 1,000 bps. We forecast AMD to continue NVDA outsource their chip manufacturing to TSMC, we believe to take server share from Intel in 2021 and expect Intel's long- they are better positioned to compete against INTC today than term gross margins will be negatively impacted as it does. in the past. We expect Intel to continue to lose share to both.
Chart 5 - Datacenter Processor Revenues - $ Chart 6 - Datacenter Sales Processor Share
10.0 100% Data Center Sales CAGRs: XLNX Data center processor 9.0 1yr: 33.5% 90% ALTR revenues have grown at a 3yr: 25.6% NVDA 5yr: 16.9% long term growth rate of 8.0 80% AMD 10yr: 15.0% 14% INTC 7.0 70% XLNX ALTR/PSG 6.0 60% NVDA 5.0 AMD 50% INTC 4.0 Series6 40%
3.0 14% Growth 30% Datacenter Sales Share Sales Datacenter Curve
2.0 20% Datacenter Sales, Quarterly bn) $ Sales, (US Datacenter
1.0 10%
0.0 0%
4Q14 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11 3Q12 2Q13 1Q14 3Q15 2Q16 1Q17 4Q17 3Q18 2Q19 1Q20
1Q20 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11 3Q12 2Q13 1Q14 4Q14 3Q15 2Q16 1Q17 4Q17 3Q18 2Q19 4Q20E . 4Q20E . Source: Jefferies, company data Source: Jefferies, Company data
In the data center, Intel's share of total processor dollars has declined from 95% to something closer to 70%. The data shows a consistent 14% CAGR over time.
January 14, 2021 5 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 7 - INTC Stock Price 120
$28 100 EPS +$1.36 P/E +2.0x 80 $14 EPS +$0.78 Bull Case @ $100 $6 P/E +1.0x 60 $53 Fabless Model EPS +$0.13 EPS: $7.0 Base Case - ex P/E +1.0x P/E: 14x 40 Restructuring @ $53 FCF: $27.7bn INTC Stock Price ($) Stock INTC Consensus EPS $4.49 20 P/E 11.8x
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*Note that the sum of the individual restructuring vectors is slightly greater than our bull case Chart 8 - INTC: Scenario Analysis Gross Margin Operating Margin EPS FCF Sale of PPE Share Count Scenarios Δ GM 2021 GM Δ OM 2021 OM Δ EPS 2021 EPS Δ FCF 2021 FCF Δ Cash 2021 Δ Shr Total Flow Cash Count Share o/s Flow Scenario 1: Divest Memory 1.7% 58.8% 1.9% 31.8% $0.13 $4.62 2,054 18,122 3,928 3,928 (100) 3,929 Scenario 2: SG&A Discipline 0.0% 57.1% 4.8% 34.6% $0.78 $5.27 2,885 18,954 - - (48) 3,981 Scenario 3: Move to Fabless -3.0% 54.1% 2.9% 32.8% $1.36 $5.86 6,699 22,767 31,458 31,458 (636) 3,393 All 3 Scenarios . Combined -1.5% 55.6% 10.2% 40.0% $2.53 $7.03 11,638 27,707 35,387 35,387 (784) 3,245 Source: Jefferies, Company data
January 14, 2021 6 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Divest Memory In Oct-20 Intel announced sale of its NAND memory and storage business to SK Hynix. Per the announcement, INTC plans to sell its profitable NAND business, but is keeping its loss-making Optane memory business. We think INTC should divest memory entirely.
Products: Intel's memory product includes Intel Optane technology and 3D NAND flash memory, primarily used in solid-state drives
Manufacturing: Fab 68 Dalian, Liaoning China. Capacity 70,000 wpm per Gartner
Chart 9 - INTC Memory Segment Operating Losses ($ bn) Intel's memory business has been a money- $6.0 120% losing venture over the past five years. By divesting this business unit, we believe $5.0 100% that INTC would not only realize higher earnings, margins and ROIC, but also that investors would afford INTC a higher P/ $4.0 80% E multiple as the INTC investment thesis Revenue would simplify to be centered around its core $3.0 60% competency in processors, instead of around both processors and memory. $2.0 40%
$1.0 20% Operating Operating Margin (%) Memory TTM bn) ($ $- 0%
$(1.0) Operating Operating -20% Income Margin
$(2.0) -40%
3Q17 2Q18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 4Q17 1Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 . 4Q15 Source: Jefferies, Company data
January 14, 2021 7 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 10 - NSG 1H20 Revenues Chart 11 - NSG 1H20 Operating Income $3.5 $800
Intel selling Intel selling ) $3.0 to SK Hynix to SK Hynix $0.2 $600 $2.5 Intel keeping Optane $400 $2.0 $600 $200 Intel keeping $1.5 $256 $2.8 $3.0 $- $1.0
1H20 Revenues ($bn) 1H20 Revenues $(344)
$0.5 $(200) 1H20 1H20 Operating Income ($m $- $(400)
. NAND Business Optane Total NSG Revs . NAND Business Optane Total NSG Source: Jefferies, Company data Source: Jefferies, Company data
The NAND business being sold in INTC's proposed memory transaction was profitable ($600m Op Profits in 1H20), but the Optane memory business that it is keeping lost money ($344m Op Loss in 1H20). As discussed in Finally Ditching Loss-Making Memory...or Not? note, we think a better outcome for the stock would be to divest memory entirely.
January 14, 2021 8 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 12 - What If INTC Shuts Memory Business We estimate that if INTC were to divest 2021 EPS Accretion 2021 2021 its memory business, it could raise $4bn Consensus Delta Ex - Memory from the sale of its PPE (our estimate), repurchase 100m shares of stock, improve Revenue $69,780 ($4,105) $65,676 its gross and operating margins by 200bps, Gross Profit 39,837 (1,231) 38,606 and add $0.13 to its EPS. We also estimate Gross Margin 57% 59% that its P/E would expand by one turn due Operating Expense 19,018 (1,283) 17,735 to $2bn in incremental FCF that could be Operating Margin 20,819 52 20,871 returned to shareholders and due to the simplification of its business model around Operating Margin 30% 32% its core competency of MPUs. Net Income 18,102 45 18,146 Share Count 4,029 (100) 3,929 We note that the consensus numbers include contribution from its memory and storage EPS $4.49 $0.13 $4.62 business (NAND and Optane). As part of the transaction announced in Oct-20, INTC 2021 Cash Flow Statement 2021 2021 plans to sell its NAND memory and storage Consensus Delta Ex - Memory business to SK Hynix while keeping the loss- Net Income $17,757 $45 $17,802 making Optane memory business. We think INTC should divest from memory entirely. Depreciation 10,423 (861) 9,561 Other Non- Cash Charges 3,602 3,602 Working Capital (778) 0 CFO 31,418 (816) 30,602 Capital Expenditure (15,350) 2,870 (12,480) % of Revenue -22% -19% FCF - Steady State $16,068 $2,054 $18,122 Sale of PPE 0 3,928 3,928 Cash Flow after Sale of PPE $16,068 $5,982 $22,050 . Source: Jefferies, FactSet, Company data
2021 consensus estimates include contributions from NAND memory and storage business
Chart 13 - Our Assumptions Assumptions Commentary Income Statement Assumptions Revenue $4,105 Visible Alpha 2021 NSG segment rev estimates Gross Profit 30% Micron's average Gross Margin Operating Expense (52) Visible Alpha 2021 NSG Segment estimates Cash Flow Statement Assumption Depreciation - % of Sales 21% Micron's average depreciation range 16%-27% Capital Spending $2,870 Per Intel's 10k 20% of capex relates to Memory PPE $3,928 Jeff analysis assuming 20% of capex relates to memory from 2016 - 2020, depreciated over 5 years Repurchases $5,982 Buyback 100% of Incremental cash flow at $60/shr . Source: Jefferies
January 14, 2021 9 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Drive SG&A Discipline A curve fit of SG&A expense vs sales of our coverage companies indicates that Chart 14 - INTC SG&A Compare Intel's SG&A expense is well above the 25% sales adjusted industry norm. The curve fit LSCC y = 0.135e-3E-05x suggests an appropriate SG&A level of 1.4%, R² = 0.3949 while the closest semiconductor company in 20% sales is AVGO at $25bn and an SG&A of 5.8%. For purposes of this exercise, we use a target XLNX SG&A of 3.6%, which is the average of the 15% curve fit and AVGO's SG&A.
% of Salesof % MXIM NVDA - MRVL ADI TXN 10% AMD ON INTC NXPI QCOM SG&A 2020SG&A IPHI 5% AVGO Range 1.4% Curve fit determined SG&A Benchmark for to $75bn sales company 6.0% 0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Sales 2020 ($bn) . Source: Factset, Jefferies, company data
January 14, 2021 10 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 15 - What If INTC Streamlined its SG&A Expenses We estimate that if INTC drove its SG&A to 2021 EPS Accretion 2021 2021 3.6%, that it could save $3.3bn in annual Consensus Delta SG&A Discipline expenses, and generate an incremental $2.8bn of annual FCF. Revenue $69,780 $69,780 Gross Profit 39,837 39,837 If it used the first year's FCF to buy back Gross Margin 57% 57% stock, and then returned the following year's FCF to shareholders, then we estimate that Operating Expense 19,018 (3,350) 15,668 it could generate an additional $0.78 in EPS, Operating Margin 20,819 3,350 24,170 and improve its P/E multiple by 1 turn based Operating Margin 30% 35% on higher sustained capital return. Net Income 18,102 2,885 20,987 Share Count 4,029 (48) 3,981 EPS $4.49 $0.78 $5.27
2021 Cash Flow Statement 2021 2021 Consensus Delta SG&A Discipline Net Income $17,757 $2,885 $20,642 Depreciation 10,423 10,423 Other Non- Cash Charges 3,602 3,602 Working Capital (778) 0 CFO 31,418 2,885 34,304 Capital Expenditure (15,350) (15,350) % of Revenue -22% -22% FCF - Steady State $16,068 $2,885 $18,954 Sale of PPE 0 0 0 Cash Flow after Sale of PPE $16,068 $2,885 $18,954 . Source: Jefferies, FactSet, Company data Chart 16 - Our Assumptions Assumptions Commentary Income Statement Assumptions Revenue n.a Gross Profit n.a SG&A - % of Sales 3.6% Mid-point of our 1.4% - 6.0% range Cash Flow Statement Assumption Depreciation - % of Sales n.a Capital Spending n.a PPE n.a Repurchases $2,885 Buyback 100% of Incremental cash flow at $60/shr . Source: Jefferies
January 14, 2021 11 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Fabless - Shift to a Fabless Model We estimate that a move to a fabless manufacturing model would have a 300bps Chart 17 - What If INTC Goes Fabless negative impact to Intel's gross margins, 2021 EPS Accretion 2021 2021 however, that this would be offset by Consensus Delta Fabless Model R&D savings the company would realize Revenue $75,332 $69,780 by terminating its process technology - Gross Profit 42,759 (2,093) 37,744 fabless companies need nominal process technology R&D (our estimate, not given by Gross Margin 57% 54% Intel). Operating Expense 19,144 (4,151) 14,867 Operating Margin 23,615 2,057 22,877 We also assume that the company would be able to sell its factories at book value, and Operating Margin 31% 33% would buy back stock with the cash received from the PPE sales. Net Income 20,732 1,772 19,873 We also estimate that the company would Share Count 4,238 (636) 3,602 save about $10bn annually in CapEx, which it EPS $4.89 $1.36 $5.52 could put to capital return.
Netting it out, we estimate that a move to a 2021 Cash Flow Statement 2021 2021 fabless model could add $1.36 of EPS and Consensus Delta Fabless Model translate to $6.7bn in annual incremental Net Income $19,291 $1,772 $19,529 FCF which would positively impact its P/ Depreciation 10,293 (4,840) 5,582 E multiple by 2 full turns if consistently returned to shareholders. Other Non- Cash Charges 3,602 3,602 Working Capital (448) 0 CFO 32,633 (3,068) 28,350 Capital Expenditure (14,350) 9,768 (5,582) % of Revenue -19% -8% FCF - Steady State $18,283 $6,699 $22,767 Sale of PPE 0 31,458 31,458 FCF $18,283 $38,158 $54,226 . Source: Jefferies, FactSet, Company data
Chart 18 - Our Assumptions Estimating the financial impact to Intel for a Assumptions Commentary 100% move to a foundry model requires a lot Income Statement Assumptions of educated "guesstimates" on our part, and Revenue n.a therefore, of the three scenarios we present, Gross Profit ($2,093) INTC loses 3% margin advantage by going fabless we view our estimates for this scenario as R&D Savings ($4,151) TSMC's average R&D spend 2018-2019 is $2.8bn having the widest confidence levels around Cash Flow Statement Assumption our estimates. Depreciation - % of Sales 8% In-line with capital intensity assumption CapEx - % of Sales 8% Higher end of range of capital intensity of AMD, NVDA We attempt to make our largest assumptions and XLNX over last 5 years transparent in this table. PPE $31,458 80% of Intel's net PPE as of 2019 Repurchases $38,158 Buyback 100% of Incremental cash flow at $60/shr . Source: Jefferies
January 14, 2021 12 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Estimated Impact of Implementing All Three Scenarios We estimate that if INTC implemented all three scenarios, that it could lower its share Chart 19 - All 3 Scenarios Combined count by 784m shares, increase its EPS by 2021 EPS Accretion 2021 2021 $2.53, its annual FCF by $11.6bn, and its P/E Consensus Delta All Together multiple by 2.5 turns by increasing its captial Revenue $69,780 ($4,105) $65,676 return and focusing its business model Gross Profit 39,837 (3,325) 36,513 around its long-standing core competency of MPUs. Gross Margin 57% 56% Operating Expense 19,018 (8,785) 10,233 Operating Margin 20,819 5,460 26,279 Operating Margin 30% 40% Net Income 18,102 4,702 22,804 Share Count 4,029 (784) 3,245 EPS $4.49 $2.53 $7.03
2021 Cash Flow Statement 2021 2021 Consensus Delta All Together Net Income $17,757 $4,702 $22,459 Depreciation 10,423 (5,701) 4,721 Other Non- Cash Charges 10,691 3,602 Working Capital (778) 0 CFO 31,418 (999) 30,419 Capital Expenditure (15,350) 12,638 (2,712) % of Revenue -22% -4% FCF - Steady State $16,068 $11,638 $27,707 Sale of PPE 35,387 35,387 FCF $33,359 $47,025 $63,093 . Source: Jefferies, FactSet, Company data
January 14, 2021 13 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 20 - INTC Income Statement FINANCIAL STATEMENTS (FYE December) 2020E 2021E 2019 2020E 2021E millions of $ except per share and % items 1Q20 2Q20 3Q20 4Q20E 1Q21E 2Q21E 3Q21E 4Q21E TOTAL REVENUE ($MM) - GAAP $19,828 $19,728 $18,333 17,443 15,599 16,659 18,343 19,179 $71,965 $75,332 $69,781 % Change Q/Q -1.9% -0.5% -7.1% -4.9% -10.6% 6.8% 10.1% 4.6% % Change Y/Y 23.5% 19.5% -4.5% -13.7% -21.3% -15.6% 0.1% 10.0% 1.6% 4.7% -7.4% TOTAL COGS - GAAP 7,812 9,221 8,592 8,198 7,057 7,346 8,053 8,212 29,825 33,823 30,667 % Sales 39.4% 46.7% 46.9% 47.0% 45.2% 44.1% 43.9% 42.8% 41.4% 44.9% 43.9% Amortization of acquisition-related intangibles 289 302 310 349 349 349 349 349 1,124 1,250 1,395 TOTAL COGS - ex amort, acq chg 7,523 8,919 8,282 7,849 6,708 6,997 7,704 7,864 28,701 32,573 29,272 % Sales 39.9% 43.2% 41.9% GROSS PROFIT- GAAP 12,016 10,507 9,741 9,245 8,543 9,314 10,290 10,967 42,140 41,509 39,113 Gross Margin - GAAP 60.6% 53.3% 53.1% 53.0% 54.8% 55.9% 56.1% 57.2% 58.6% 55.1% 56.1% GROSS PROFIT- ex 1x's 12,305 10,809 10,051 9,594 8,892 9,662 10,639 11,316 43,264 42,759 40,509 Gross Margin - ex amort, acq chg 62.1% 54.8% 54.8% 55.0% 57.0% 58.0% 58.0% 59.0% 60.1% 56.8% 58.1% R&D - GAAP 3,275 3,354 3,272 3,403 3,175 3,283 3,449 3,528 13,362 13,304 13,436 % Sales 16.5% 17.0% 17.8% 19.5% 20.4% 19.7% 18.8% 18.4% 18.6% 17.7% 19.3% SG&A - GAAP 1,491 1,397 1,383 1,569 1,439 1,488 1,563 1,599 6,150 5,840 6,089 % Sales 7.5% 7.1% 7.5% 9.0% 9.2% 8.9% 8.5% 8.3% 8.5% 7.8% 8.7% OTHER CHARGES 212 59 27 - - - - - 588 298 - % Sales 1.1% 0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.4% 0.0% TOTAL OPEX - GAAP 4,978 4,810 4,682 4,972 4,615 4,771 5,012 5,127 20,100 19,442 19,525 TOTAL OPEX - ex amort, acq chg 4,766 4,751 4,655 4,972 4,615 4,771 5,012 5,127 19,512 19,144 19,525 OPERATING PROFIT- GAAP 7,038 5,697 5,059 4,273 3,928 4,542 5,278 5,840 22,040 22,067 19,588 % Sales 35.5% 28.9% 27.6% 24.5% 25.2% 27.3% 28.8% 30.5% 30.6% 29.3% 28.1% OPERATING PROFIT- ex 1x's 7,539 6,058 5,396 4,622 4,277 4,891 5,626 6,189 23,752 23,615 20,984 % Sales 38.0% 30.7% 29.4% 26.5% 27.4% 29.4% 30.7% 32.3% 33.0% 31.3% 30.1% NET INTEREST & OTHER (GAAP) (424) 238 (18) 696 300 300 300 300 2,023 492 1,200 Ongoing mark-to-market on marketable equity securities 103 (165) 140 (1,155) NET INTEREST & OTHER (Non-GAAP) (321) 73 122 696 300 300 300 300 868 570 1,200 PRETAX PROFIT- GAAP 6,614 5,935 5,041 4,969 4,228 4,842 5,578 6,140 24,063 22,559 20,788 % Sales 33.4% 30.1% 27.5% 28.5% 27.1% 29.1% 30.4% 32.0% 33.4% 29.9% 29.8% PRETAX PROFIT- ex 1x's 7,218 6,131 5,518 5,318 4,577 5,191 5,926 6,489 24,620 24,185 22,184 34.2% 32.1% 31.8% TAXES- GAAP 953 830 765 721 634 726 837 921 3,010 3,269 3,118 Tax rate 14.4% 14.0% 15.2% 14.5% 15.0% 15.0% 15.0% 15.0% 12.5% 14.5% 15.0% TAXES ex 1x's 986 853 843 771 687 779 889 973 2,835 3,453 3,328 Tax rate ex 1x's 14.4% 14.0% 15.2% 14.5% 15.0% 15.0% 15.0% 15.0% 11.5% 14.3% 15.0% NET INCOME- GAAP 5,661 5,105 4,276 4,249 3,594 4,116 4,741 5,219 21,053 19,291 17,670 % Sales 28.6% 25.9% 23.3% 24.4% 23.0% 24.7% 25.8% 27.2% 29.3% 25.6% 25.3% EXTRAORDINARIES, Net of Tax 212 59 27 - - - - - 588 298 - N.I. Non-GAAP (ex amort, acq chg) 6,232 5,278 4,675 4,547 3,890 4,412 5,037 5,516 21,785 20,732 18,856 SBC 449 492 452 452 452 452 452 452 1,705 1,845 1,808 N.I. - Non-GAAP (ex-1x, ex-SBC) 6,322 5,656 4,755 4,701 4,046 4,568 5,193 5,671 23,346 21,434 19,478 EPS - GAAP $1.31 $1.19 $1.02 $1.02 $0.88 $1.02 $1.20 $1.34 $4.71 $4.55 $4.43 EPS - Non-GAAP (ex amort, acq chg, Incl. SBC) $1.45 $1.23 $1.11 $1.10 $0.95 $1.10 $1.27 $1.42 $4.87 $4.89 $4.72 DIVIDENDS PER SHARE $0.33 $0.33 $0.33 $0.33 $0.33 $0.33 $0.33 $0.33 $1.26 $1.32 $1.32 AVG. SHARES - Diluted 4,312 4,284 4,211 4,146 4,097 4,027 3,957 3,887 4,473 4,238 3,992 . AVG. SHARES - Basic 4,266 4,246 4,188 4,123 4,074 4,004 3,934 3,864 4,417 4,206 3,969 Source: Jefferies, Company data
January 14, 2021 14 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 21 - INTC Balance Sheet FINANCIAL STATEMENTS (FYE December) 2020E 2021E 2019 2020E 2021E millions of $ except per share and % items 1Q20 2Q20 3Q20 4Q20E 1Q21E 2Q21E 3Q21E 4Q21E BALANCE SHEET Cash and cash equivalents $ 11,380 $ 8,736 $ 3,356 $ 2,776 $ 4,710 $ 3,173 $ 3,550 $ 11,505 $ 4,194 $ 2,776 $ 11,505 Short-term investments 1,296 4,791 2,987 2,987 1,082 2,987 - Trading assets 8,127 12,288 11,910 11,910 11,910 11,910 11,910 11,910 7,847 11,910 11,910 Accounts receivable 8,455 7,441 7,140 6,285 5,200 5,368 5,707 6,910 7,659 6,285 6,910 Inventory 9,246 8,969 9,273 8,003 7,859 8,162 8,811 8,017 8,744 8,003 8,017 Raw materials 877 903 975 840 - - Work in process 6,654 6,093 6,313 6,225 - - Finished goods 1,715 1,973 1,985 1,679 - - Other current assets 2,997 2,165 2,119 3,526 3,526 3,526 3,526 3,526 1,713 3,526 3,526 Total current assets 41,501 44,390 36,785 35,487 33,205 32,139 33,504 41,868 31,239 35,487 41,868 0 0 Property, plant and equipment, net 56,770 58,036 59,205 60,795 61,863 62,888 63,873 57,818 55,386 60,795 57,818 Marketable securities 3,880 3,901 3,679 3,679 3,679 3,679 3,679 3,679 3,967 3,679 3,679 Other long-term investments 2,943 2,884 2,720 2,720 2,720 2,720 2,720 2,720 3,276 2,720 2,720 Goodwill 26,276 26,943 26,955 26,955 26,955 26,955 26,955 26,955 26,276 26,955 26,955 Intangible assets, net 10,429 10,303 9,881 9,435 8,989 8,543 8,097 7,651 10,827 9,435 7,651 Other assets 5,911 6,082 6,036 6,036 6,036 6,036 6,036 6,036 5,553 6,036 6,036 Total assets $ 147,710 $ 152,539 $ 145,261 $ 145,106 $ 143,447 $ 142,960 $ 144,864 $ 146,727 $ 136,524 $ 145,106 $ 146,727 0 0 Current portion of debt 3,464 2,254 504 504 504 504 3,504 6,504 3,693 504 6,504 Accounts payable 4,638 5,045 5,159 4,219 4,108 5,190 4,905 4,227 4,128 4,219 4,227 Accrued compensation and benefits 2,358 2,833 3,197 3,042 2,720 2,905 3,199 3,345 3,853 3,042 3,345 Other liabilities 13,435 12,349 13,252 13,252 13,252 13,252 13,252 13,252 10,636 13,252 13,252 Total current liabilities 23,895 22,481 22,112 21,017 20,584 21,851 24,860 27,327 22,310 21,017 27,327 - - Long-term income taxes payable 4,651 4,795 4,811 4,811 4,811 4,811 4,811 4,811 4,919 4,811 4,811 Contract Liabilities 1,353 1,329 1,381 1,381 1,381 1,381 1,381 1,381 1,368 1,381 1,381 Deferred tax liabilities 2,027 2,723 2,995 2,995 2,995 2,995 2,995 2,995 2,044 2,995 2,995 Long-term debt 36,455 36,093 36,059 36,059 36,059 36,059 36,059 36,059 25,308 36,059 36,059 Other long-term liabilities 2,975 3,108 3,349 3,349 3,349 3,349 3,349 3,349 2,916 3,349 3,349 Total liabilities 71,356 70,529 70,707 69,612 69,179 70,446 73,455 75,922 58,865 69,612 75,922 - - Stockholders' equity: - - Common stock 25,251 25,516 23,335 23,335 23,335 23,335 23,335 23,335 25,261 23,335 23,335 Accumulated other comprehensive income (1,541) (1,152) (940) (3,340) (7,268) (12,268) (17,268) (22,268) (1,280) (3,340) (22,268) Retained earnings 52,644 57,646 52,159 55,499 58,201 61,447 65,342 69,738 53,523 55,499 69,738 Other ------155 - - Total stockholders' equity 76,354 82,010 74,554 75,494 74,268 72,514 71,409 70,805 77,659 75,494 70,805 . Total liabilities and stockholders' equity $ 147,710 $ 152,539 $ 145,261 $ 145,106 $ 143,447 $ 142,960 $ 144,864 $ 146,727 $ 136,524 $ 145,106 $ 146,727 Source: Jefferies, Company data
January 14, 2021 15 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Chart 22 - INTC Cash Flow Statement FINANCIAL STATEMENTS (FYE December) 2020E 2021E 2019 2020E 2021E millions of $ except per share and % items 1Q20 2Q20 3Q20 4Q20E 1Q21E 2Q21E 3Q21E 4Q21E CASH FLOW STATEMENT Net Income (loss) $ 5,661 $ 5,105 $ 4,276 $ 4,249 $ 3,594 $ 4,116 $ 4,741 $ 5,219 $ 21,048 $ 19,291 $ 17,670 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 2,623 2,625 2,677 2,368 2,432 2,475 2,516 2,555 9,204 10,293 9,977 Stock compensation expense 449 492 452 452 452 452 452 452 1,705 1,845 1,808 Amortization of intangible assets 427 438 446 446 446 446 446 446 1,622 1,757 1,784 (Gains) losses on equity investments 134 (226) (13) (892) (105) - (Gains) losses on divestures, sales of assets (690) - - Changes in operating assets and liabilities: Trading assets - - - Accounts receivable (796) 1,020 301 855 1,085 (168) (339) (1,204) (935) 1,380 (625) Inventory (548) 277 (299) 1,270 144 (303) (649) 794 (1,481) 700 (14) Other current assets - - - Accounts payable 117 91 147 (940) (111) 1,082 (285) (678) 696 (585) 7 Accrued expenses (compensation and benefits) (1,500) 581 431 (155) (322) 185 294 146 91 (643) 303 Deferred Income taxes payable and receivable 753 450 (710) 885 493 - Other operating assets and liabilities (1,162) 304 471 (1,407) - - - 1,892 (1,794) - Cash provided by (used in) operating activities $ 6,158 $ 11,157 $ 8,179 $ 7,138 $ 7,720 $ 8,284 $ 7,176 $ 7,730 $ 33,145 $ 32,632 $ 30,909
Cash flow from investing activities: Purchase of property and equipment (3,268) (3,408) (3,716) (3,958) (3,500) (3,500) (3,500) (3,500) (16,213) (14,350) (14,000) Proceeds from sale of property, equipment and software 7,000 - - 7,000 Purchases/sales of available-for-sale investments (513) (4,045) (1,765) (2,030) (6,323) - Maturities and sales of available-for-sale investments 625 678 3,734 3,988 5,037 - Purchases of trading assets (3,897) (7,532) (3,315) (9,162) (14,744) - Maturities and sales of trading assets 3,660 3,770 3,797 7,178 11,227 - Investments in non-marketable equity investments 339 2,166 339 - (Acquisition) divestitures (1,047) - - Other (343) (73) 160 715 (256) - Cash provided by (used in) investing activities $ (3,736) $ (10,610) $ (766) $ (3,958) $ (3,500) $ (3,500) $ (3,500) $ 3,500 $ (14,405) $ (19,070) $ (7,000)
Cash flow from financing activities: Increase (decrease) in debt 9,172 (1,700) (1,750) 3,000 3,000 765 5,722 6,000 Proceeds from stock option exercises and ESPP 503 9 385 750 897 - Repurchases of common stock (4,229) - (10,000) (2,400) (3,928) (5,000) (5,000) (5,000) (13,576) (16,629) (18,928) Payment of dividends (1,408) (1,403) (1,404) (1,360) (1,344) (1,321) (1,298) (1,275) (5,576) (5,575) (5,239) Other 726 (97) (24) 72 605 - Cash provided by (used in) financing activities $ 4,764 $ (3,191) $ (12,793) $ (3,760) $ (5,272) $ (6,321) $ (3,298) $ (3,275) $ (17,565) $ (14,980) $ (18,167) Effect of exchange rate fluctuations on cash and cash equivalents . Net change in cash and cash equivalents $ 7,186 $ (2,644) $ (5,380) $ (580) $ (1,053) $ (1,538) $ 378 $ 7,955 $ 1,175 $ (1,418) $ 5,742 Source: Jefferies, Company data
January 14, 2021 16 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Company Description Intel Intel Corporation is a semiconductor chip maker company. The company develops advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. The Company designs and manufactures computing and communications components, such as microprocessors, chipsets, motherboards, and wireless and wired connectivity products, as well as platforms that incorporate these components.
Company Valuation/Risks Intel Our $53 PT assumes an 11.2x multiple on our 2021 non-GAAP EPS forecast of $4.72, which falls towards the lower end of INTC's 5 yr PE range of 9x-15x as INTC falls behind TSMC. We believe a low multiple is justified as INTC divests the profit-making portion of its Memory business and retains the loss-making portion and lower probability of INTC streamlining SG&A costs. Risks: prolonged demand destruction due to COVID-19, decline in PCs; mis-execution on 10nm; and greater competition in servers and PCs.
Advanced Micro Devices, Inc. Our $100 PT assumes P/E ratio of 15x on 4-to-5 yr EPS Power of $6.75. A P/E of 15x is within AMD's historical range of 14x-50x range. We think a multiple towards the higher end of the range is justified given that AMD is gaining share as it is undergoing a major sever product cycle when its only competitor is struggling to deliver its roadmap. Risks include weaker sales of PCs, mis-execution and more aggressive pricing from Intel and Nvidia.
NVIDIA Corporation Our $680 PT assumes 63x P/E on our C2021E Non GAAP EPS of $10.86, which is well above the high end of historical range of 16x-54x. We think a higher multiple is justified as NVDA is on a roadmap to grow its EPS by CAGR of ~37% over the next 5-yrs as it builds its ecosystem starting with chips, switch fabrics, software and AI computing systems. A multiple of 63x translates into a PEG ratio of 1.7x which we think is justified. Downside risks include demand destruction due to prolonged outbreak of COVID-19 virus, slower PC Gaming growth and competition from INTC, AMD or new entrants to deep learning market. Upside risks include faster adoption of DL applications in Datacenter and Auto and early containment of COVID-19 virus.
Analyst Certification: I, Mark Lipacis, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I, Vedvati Shrotre, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I, Natalia Winkler, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgement. Investment Recommendation Record (Article 3(1)e and Article 7 of MAR) Recommendation Published January 14, 2021 , 07:37 ET. Recommendation Distributed January 14, 2021 , 07:37 ET. Company Specific Disclosures Jefferies Group LLC makes a market in the securities or ADRs of Intel Corporation.
January 14, 2021 17 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Jefferies Group LLC makes a market in the securities or ADRs of NVIDIA Corporation. Within the past twelve months, Jefferies LLC and/or its affiliates received compensation for products and services other than investment banking services from non-investment banking, securities related compensation for client services it provided to Intel Corporation. Within the past twelve months, Jefferies LLC and/or its affiliates received compensation for products and services other than investment banking services from non-investment banking, securities related compensation for client services it provided to Advanced Micro Devices, Inc.. Explanation of Jefferies Ratings Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period. Hold - Describes securities that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period. Underperform - Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month period. The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperform rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% or less within a 12-month period. NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/or Jefferies policies. CS - Coverage Suspended. Jefferies has suspended coverage of this company. NC - Not covered. Jefferies does not cover this company. Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities regulations prohibit certain types of communications, including investment recommendations. Monitor - Describes securities whose company fundamentals and financials are being monitored, and for which no financial projections or opinions on the investment merits of the company are provided. Valuation Methodology Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF, P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns, and return on equity (ROE) over the next 12 months.
Jefferies Franchise Picks Jefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selection is based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/reward ratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the number can vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason for inclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility in the bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intended to represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment style such as growth or value.
Risks which may impede the achievement of our Price Target This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of the financial instruments recommended in this report should not be taken as an indication or
January 14, 2021 18 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC) guarantee of future results. The price, value of, and income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk. Other Companies Mentioned in This Report • Advanced Micro Devices, Inc. (AMD: $91.78, BUY) • NVIDIA Corporation (NVDA: $541.27, BUY)
Rating and Price Target History for: Intel Corporation (INTC) as of 01-13-2021
01/26/2018 UNPF:$38.00 04/27/2018 UNPF:$42.00 07/27/2018 UNPF:$44.00 10/26/2018 UNPF:$40.00 01/21/2020 HOLD:$64.00 01/24/2020 HOLD:$65.00 70
65
60
55
50
45
40 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2 Q3 2021
03/25/2020 HOLD:$53.00 04/22/2020 HOLD:$62.00 08/03/2020 HOLD:$54.00 10/23/2020 HOLD:$50.00
Rating and Price Target History for: Advanced Micro Devices, Inc. (AMD) as of 01-13-2021
07/26/2018 BUY:$22.00 09/03/2018 BUY:$30.00 09/21/2018 BUY:$36.00 10/25/2018 BUY:$30.00 04/23/2019 BUY:$34.00 07/31/2019 BUY:$40.00 11/07/2019 BUY:$42.00 100
80
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40
20
0 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2 Q3 2021
01/07/2020 BUY:$56.00 01/29/2020 BUY:$58.00 03/06/2020 BUY:$60.00 03/25/2020 BUY:$54.00 04/29/2020 BUY:$63.00 07/29/2020 BUY:$86.00 08/04/2020 BUY:$95.00
10/07/2020 BUY:$100.00
Rating and Price Target History for: NVIDIA Corporation (NVDA) as of 01-13-2021
02/09/2018 BUY:$300.00 05/11/2018 BUY:$320.00 11/16/2018 BUY:$246.00 01/29/2019 BUY:$185.00 04/23/2019 BUY:$227.00 05/17/2019 BUY:$210.00 600
500
400
300
200
100 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2 Q3 2021
11/15/2019 BUY:$250.00 12/16/2019 BUY:$255.00 02/11/2020 BUY:$315.00 02/14/2020 BUY:$330.00 03/25/2020 BUY:$290.00 05/15/2020 BUY:$370.00
05/22/2020 BUY:$405.00 06/17/2020 BUY:$415.00 08/20/2020 BUY:$570.00 09/14/2020 BUY:$680.00
January 14, 2021 19 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
Notes: Each box in the Rating and Price Target History chart above represents actions over the past three years in which an analyst initiated on a company, made a change to a rating or price target of a company or discontinued coverage of a company. Legend:
I: Initiating Coverage
D: Dropped Coverage
B: Buy
H: Hold
UP: Underperform Distribution of Ratings Distribution of Ratings
IB Serv./Past12 Mos. JIL Mkt Serv./Past12 Mos.
Count Percent Count Percent Count Percent
BUY 1562 59.41% 150 9.60% 18 1.15%
HOLD 929 35.34% 24 2.58% 6 0.65%
UNDERPERFORM 138 5.25% 2 1.45% 1 0.72%
January 14, 2021 20 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
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January 14, 2021 21 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
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January 14, 2021 22 Please see important disclosure information on pages 17 - 23 of this report. EQUITY RESEARCH Intel Corporation (INTC)
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January 14, 2021 23 Please see important disclosure information on pages 17 - 23 of this report.