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The Resilience of Intel Stock Makes It a Winner

The stock market has undergone an intense selloff, and one of the sectors getting hit hardest is the semiconductor space. Due to slowing demand and rising supply, many semiconductor companies have reported weak quarterly results while providing disappointing guidance. As a result, semiconductor stocks have dropped. The iShares PHLX Semiconductor ETF (OTCMKTS:SOXX) has tumbled about 11% over the past three months.

But Intel (NASDAQ:INTC) stock has bucked the trend, as the shares have actually risen slightly over the past few months. Moreover, while the entire Nasdaq has dropped about 15% from its trailing three-month high, Intel stock is just roughly 4% off its trailing three-month high.

In other words, INTC stock has demonstrated an impressive resilience amid the recent market turbulence.

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That’s because Intel stock is supported by attractive defensive attributes which tend to enable stocks to outperform during periods of uncertainty. The valuation of Intel stock is low, while the chip maker’s balance sheet is healthy and supported by strong cash flows. Additionally, its dividend yield is healthy and sustainable, while the company’s operating fundamentals are stable and indicate that it can continue to grow slowly even if economic growth decelerates.

So Intel stock is supported by an impressive number of resilient factors. These resilient factors will keep INTC stock strong even if the overall market remains bearish.

As a result, for investors who are looking to increase their exposure to risk-adverse tech names during this volatile stretch, Intel stock is as good a choice as any.

Intel’s Fundamentals Are Likely to Remain Strong

There’s been a lot of talk about the fundamentals of the semiconductor space deteriorating due to falling demand and rising supply. After all, chip giants Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) have been badly hurt by the disappearance of the crypto boom, while many chip companies are cutting their guidance due to lower than expected demand from Apple (NASDAQ:AAPL).


Bu Intel’s outlook doesn’t have much to do with cryptocurrency mining or smartphones. Instead, Intel’s future is tied to data centers. Across the board, strong demand from data centers has been the only positive catalyst for the semiconductor space.

Look at Intel’s recent quarterly results, which featured record revenue. The tech giant’s top line rose 19% year-over year. INTC’s bottom line also set a record, as its profits rose nearly 40% year-over-year. Most importantly, its data-centric business continued to be impressive, with 22% revenue growth, and INTC’s data-center business beat expectations with a whopping 26% revenue growth rate. Moreover, Intel lifted its full-year 2018 revenue and profit guidance, strongly implying that it expects its data-center business to remain strong for the foreseeable future.

Also, even AMD and Nvidia said that their data-center businesses have remained robust.

While the semiconductor sector’s growth outlook is weakening, the growth outlook of data centers is not weakening. Intel stock is supported by the strong outlook of INTC’s data-center business, meaning that the company’s fundamentals are likely to remain healthy.

Intel Has Attractive, Low-Risk Attributes

During the recent market selloff, the high-growth glamour stocks have been hit the hardest. Think Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Alphabet (NASDAQ:GOOG). Or Nvidia, Apple, and AMD. Or smaller names like Square (NYSE:SQ) and Roku (NASDAQ:ROKU).

But Intel stock was never a high-growth glamour stock. At its peak, it was a $57 stock trading at 13 times its expected forward earnings and nine times its trailing EBITDA. Those aren’t the multiples of a glamorous stock.

Today those multiples are even lower. Now Intel stock trades at just ten times its forward earnings and seven times its trailing EBITDA. Even if the market selloff intensifies, it’s tough to believe that shares with the valuation of Intel stock would fall much below current levels, given the company’s strong fundamentals and positive growth outlook.

Meanwhile, the company’s $28 billion debt load is offset by its trailing twelve-month EBITDA of $33 billion and its nearly $15 billion in trailing twelve-month cash flow, according to YCharts. Furthermore, the dividend yield of Intel stock stands at 2.5%, and the dividend is supported by a very healthy payout ratio of about 36%.

In summary, Intel stock is a low-multiple, high-yield stock with healthy operating fundamentals and healthy financials. That makes this stock a defensive play that still has exposure to the continuous growth outlook of AI. Thus, for investors seeking to cautiously the buy the dip in tech stocks, Intel stock is as good a choice as any.

The Bottom Line on INTC Stock

Intel stock has been impressively resilient during the recent market rout, indicating that INTC stock will rise meaningfully once the broader markets strengthen.

As of this writing, Luke Lango was long INTC, NVDA, AAPL, FB, AMZN, NFLX, GOOG, SQ, and ROKU. 

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