Tag: Intel Corporation (INTC)

Intel Backed Astera Labs Goes Public: What Investors Need to Know

Posted on by The INO.com Team

In 2020, Intel Capital, the global investment arm of Intel Corporation (INTC), made a significant move by unveiling a momentous investment initiative of $132 million. This injection of funds fueled the growth of 11 cutting-edge technology startups, each driving innovation in Artificial Intelligence (AI), autonomous computing, and chip design.

Among these 11 disruptive startups, Astera Labs, Inc. emerged as a key player, ready to redefine connectivity solutions and spearhead transformative industry shifts. Established in 2017, Astera quickly made waves in the semiconductor realm with its state-of-the-art connectivity solutions tailored for AI and cloud applications.

Notably, last year, the chip startup made a significant announcement regarding its entire product portfolio. The company revealed that its products are now equipped to fast-track cloud-scale workloads with unprecedented scaling capabilities.

This development comes at a time when the global cloud AI market is projected to experience substantial growth. It is estimated to reach $647.61 billion by 2030, growing at an impressive CAGR of 39.6% from 2023 to 2030.

Astera’s innovative approach to data center connectivity, bridging accelerators, CPUs, GPUs, memory, and networking, is proving vital in supporting the expansion of cloud infrastructure for AI and data-driven applications at scale.

Thad Omura, SVP of Business and Corporate Development at Astera Labs, underscored the prowess of the company's hardware-optimized PCIe, CXL, and Ethernet connectivity portfolio. He emphasized that these solutions have been meticulously crafted with a software-defined approach, enabling them to deliver unprecedented scale for AI infrastructure and cloud connectivity.

Moreover, encouraged by the prevailing AI frenzy, the chip startup recently announced its plans to transition into a publicly traded entity, set to trade under the ticker symbol “ALAB” on NASDAQ.

The company is gearing up to offer 17.80 million shares priced between $27 and $30 each, aiming to raise to $534 million. Following the completion of the deal, there will be 150.50 million outstanding shares, potentially valuing the company at $4.50 billion at the upper end of that range.

Morgan Stanley and J.P. Morgan have taken on the role of lead joint book runners for this Initial Public Offering (IPO). Additionally, Barclays, Deutsche Bank Securities, Evercore ISI, and Jefferies are also serving as book runners. Meanwhile, Needham & Company, Stifel, Craig-Hallum Capital Group, Roth Capital Partners, Loop Capital Markets, and Siebert Williams Shank have stepped in as co-managers.

The funds raised from this IPO will be allocated towards working capital and general corporate purposes, with the potential for utilization in acquisitions if suitable opportunities emerge. In a letter included in the filing papers, the three founders of Astera, Jitendra Mohan, Sanjay Gajendra, and Casey Morrison, share their unwavering commitment to the transformative power of AI.

The three founders kickstarted their venture in a garage. Their brainchild, Astera Labs, birthed three product families, each tackling crucial bottlenecks in AI infrastructure.

Aries, designed to enhance CPUs and GPUs, facilitates the scaling of data input/output bandwidth. Taurus focuses on providing AI servers with accelerated network bandwidth. Meanwhile, Leo enables the seamless scaling of memory bandwidth and capacity for CPUs and GPUs.

Astera projects its total addressable market (TAM) to skyrocket to nearly $27.40 billion by 2027, up from approximately $17.20 billion in 2023. In addition, the company boasts an impressive clientele, counting chip industry giants like INTC, NVIDIA Corporation (NVDA), and Advanced Micro Devices, Inc. (AMD).

Riding the wave of strong chip demand, the company witnessed a solid year-over-year topline growth in fiscal year 2023. In its Form S-1 filing, Astera reported revenue of $115.79 million, marking a robust 44.9% year-over-year growth. The company also saw a notable uptick in its gross profit, climbing to $79.83 million from $58.68 million the previous year.

On the other hand, as a result of making substantial investments in the design and development of new products and platform enhancements, the company remains unprofitable in 2023, incurring a net loss of $26.26 million and $0.71 per share. Yet, this reflects an improvement compared to fiscal year 2022, where the net loss was $58.35 million and $1.71 per share.

Bottom Line

Astera Labs has positioned itself as a frontrunner in the semiconductor industry, driven by its innovative connectivity solutions tailored for AI and cloud applications.

Backed by a significant investment initiative from INTC and boasting impressive financial growth, the company’s transition into a publicly traded entity signifies its confidence in its products and growth potential.

Furthermore, Astera’s IPO announcement arrives amid a perfect storm of opportunity. With the demand for semiconductor chips, especially those powering AI applications, soaring to new heights, the stage is set for Astera's ascent. For instance, NVDA’s stock has surged dramatically, seemingly unstoppable in its ascent.

Meanwhile, the shares of AMD and Taiwan Semiconductor Manufacturing Company Ltd. (TSM) have also witnessed significant rises, reflecting the broader trend of robust demand for semiconductor chips.

That said, with a strategic focus on addressing critical bottlenecks in AI infrastructure and a solid client base, including industry giants, Astera is well-poised to capitalize on the booming demand for semiconductor chips. Despite remaining unprofitable in fiscal year 2023, the company’s continuous investments in product development reflect its commitment to unlocking AI's full potential.

Moreover, the funds infusion from the IPO will provide Astera with a substantial financial boost, empowering the company to enhance its operational capabilities and drive strategic growth initiatives.

Overall, Astera’s IPO represents a significant milestone in its journey toward becoming a major player in the semiconductor landscape, with promising prospects for future growth and expansion. Keeping all these factors in mind, Astera emerges as a strong investment candidate.

 

Nvidia vs. Netflix- Which Is the #1 Growth Stock to Buy in March?

Posted on by The INO.com Team

With the S&P 500 soaring roughly 8% year-to-date, stocks have experienced a solid start in 2024, with investors reaping the rewards of putting their money in high-growth stocks. This positive momentum is expected to persist throughout the rest of the year and beyond.

Amid this market rally, chip giant NVIDIA Corporation (NVDA) and entertainment powerhouse Netflix, Inc. (NFLX) have emerged as beacons of growth, capturing investor’s bullish sentiment.

Although operating in distinct industries with unique business models, these titans share striking parallels in their journey to success. Their unwavering commitment to excellence, combined with strategic flexibility, has catapulted them to the forefront of their respective industries.

Therefore, let’s explore the fundamentals of NVDA and NFLX to unveil the ultimate growth contender of the month.

Last Reported Quarterly Results

In the fiscal fourth quarter that ended January 28, 2024, NVDA witnessed a staggering 265.3% year-over-year surge in its topline, totaling $22.10 billion. The company’s non-GAAP net income surged to $12.84 billion and $5.16 per share, marking a remarkable increase of 490.6% and 486.4% from the prior-year quarter, respectively.

As of January 28, 2024, NVDA’s cash, cash equivalents and marketable securities stood at $25.98 billion.

Conversely, for the fourth quarter that ended December 31, 2023, NFLX’s revenue rose 12.5% year-over-year to $8.83 billion. The company also experienced significant growth in net income and EPS compared to the previous year’s quarter, amounting to $937.84 million and $2.11, respectively. As of December 31, 2023, NFLX held $7.12 billion in cash and cash equivalents.

Growth Trajectory

NVDA, the reigning chip powerhouse, is currently one of the market's most sizzling stocks. Since its inception in 1993, NVDA has spearheaded cutting-edge computer chip technology, pushing the boundaries of graphics-heavy video games to unparalleled heights.

However, with the emergence of Artificial Intelligence (AI), these chips have swiftly ascended to newfound prominence, reflecting NVDA's enduring innovation and strategic adaptability. The company stands as a global giant in the production of Graphics Processing Units (GPUs) renowned for their ability to handle complex mathematical operations, powering captivating visuals across devices.

These advanced chips have become indispensable for training state-of-the-art AI programs such as ChatGPT and Gemini, underscoring NVDA’s pivotal role in driving the AI revolution forward. Leveraging AI to its advantage, NVDA’s earnings reports have managed to exceed expectations throughout 2023.

Furthermore, NVDA’s shares soared roughly 200% over the past year, buoyed by the company’s stellar earnings performance and solid demand for its AI chips. This surge attracted both institutional and retail investors, driving up share prices. With a market cap of around $2 trillion, NVDA has now claimed the title of the world's third most valuable company.

On the other hand, commanding a market cap of over $268 billion, NFLX stands as a pioneer in the streaming entertainment space, revolutionizing how audiences consume content worldwide. With a vast library of original programming and a global subscriber base, NFLX enjoys unrivaled dominance in the industry.

In a recent conference, NFLX’s CFO Spencer Neumann elaborated on NFLX’s trajectory under its revamped Co-CEO structure and its ambitious vision for future expansion. Neumann emphasized the smooth transition to the new leadership structure and NFLX’s dedication to broadening its entertainment repertoire, spanning films, TV series, gaming endeavors, and live content experiences.

Over the last few years, the tech company has adopted several strategic approaches to bolster its financial health. NFLX’s growth strategy hinges significantly on its substantial investment in content, with an annual expenditure projected at approximately $17 billion.

In addition, Netflix is venturing into new revenue avenues, including the introduction of an ad-supported subscription tier and measures aimed at bolstering monetization, such as combating password sharing.

Moreover, despite its risky move of cracking down on password sharing, NFLX’s latest earnings report revealed a surge of 13 million new subscribers in the final quarter of 2023, marking its most substantial growth since 2020. While initially met with resistance, the strategic move has been designed to counteract declining subscribership.

Greg Peters, NFLX’s Managing Director, emphasized during the earnings call that the company's top priority regarding ads is scalability. He highlighted a 70% quarter-on-quarter growth in the last quarter, following a similar growth trend in the previous quarter, indicating a positive growth trajectory for the company.

Competitive Landscape

In the dynamic worlds of technology and entertainment, both NVDA and NFLX are fiercely vying for supremacy in their domains.

The soaring popularity of generative AI owes a significant debt to NVDA and its groundbreaking GPUs. With skyrocketing demand and tight supply, NVDA's GPU H100 has emerged as a highly sought-after and premium-priced commodity, propelling NVDA to trillion-dollar status for the very first time.

With tech giants such as Microsoft Corporation (MSFT), Meta Platforms Inc. (META), OpenAI, Amazon.com Inc. (AMZN), and Alphabet Inc. (GOOGL) heavily relying on NVDA’s GPU chips to power their generative AI planforms, these companies have started developing their own AI processors.

In addition, NVDA faces stiff competition from other chip makers like Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC), all striving to release the newest, most efficient, and potent AI chips to dominate the market.

Meanwhile, NFLX confronts fierce competition from fellow FAAMG (Meta (formerly Facebook), Apple Inc. (AAPL), Amazon, Microsoft, and Alphabet’s Google) heavyweights. The streaming arena is now brimming with contenders like Apple TV+, Amazon Prime Video, and YouTube Premium, launched by Apple, Amazon, and Google, respectively.

This fierce rivalry compels NFLX to perpetually innovate and enrich its content library to retain its crown as the streaming kingpin. Furthermore, the mounting expenses of content licensing and the delicate balance between original productions and licensed content present enduring hurdles for NFLX to overcome.

Bottom Line

As evidenced by their latest quarterly results, both NVDA and NFLX continue to deliver impressive performances, standing as formidable players in their respective industries, with their growth trajectories reflecting their strategic prowess and market dominance.

NVDA's cutting-edge GPU chips have propelled it to the forefront of the AI revolution, with staggering earnings growth and market capitalization making it a top contender in the tech landscape.

Fueled by these promising prospects, NVDA’s shares soared to unprecedented heights last month, with its market cap skyrocketing by a Jaw-dropping $267 billion in a single day. This remarkable surge nearly matched the entire market cap of NFLX, reflecting immense investor confidence in NVDA’s prospects.

NFLX, on the other hand, dominates the streaming entertainment space with its vast content library and global subscriber base. Despite facing stiff competition from tech giants and emerging streaming platforms, NFLX remains focused on expansion and innovation, which is evident in its ambitious growth strategies and robust financial health in the last reported quarter.

While challenges and competition persist, NVDA and NFLX demonstrate resilience, adaptability, and a relentless drive for success, making them compelling options for investors seeking growth opportunities in the dynamic worlds of technology and entertainment.

However, NVDA’s shares are trading at a much higher valuation than NFLX. For instance, in terms of forward Price/Sales, NVDA is trading at 19.37x, 178.7% higher than NFLX’s 6.95x. Likewise, NVDA’s forward Price/Book ratio of 24.32 is 116.2% higher than NFLX’s 11.25x.

The higher valuation of NVDA compared to NFLX indicates investor confidence in NVDA's future growth potential, leading investors to be willing to pay a premium price for its shares. However, it also signals that NVDA's anticipated growth might already be factored into its stock price, potentially dimming its attractiveness compared to NFLX.

Furthermore, while NVDA’s ascent captivates the stock market and propels the S&P 500 Index to unprecedented highs, Barclays research analyst Sandeep Gupta anticipates that demand for AI chips will stabilize once the initial training phase concludes.

Gupta underscores that during the inference stage, the computational demand is lower compared to training, suggesting that high-powered PCs and smartphones could suffice for local inference tasks. Consequently, this scenario may reduce the urgency for NVDA’s expanding GPU facilities.

As a result, investors might be banking on future growth that could potentially fail to materialize. With that being said, NFLX may emerge as a more promising growth stock compared to NVDA.

Buy Alert: Is Intel (INTC) Ready to Dominate the CPU Market Once Again?

Posted on by The INO.com Team

The semiconductor powerhouse Intel Corporation (INTC), which annually unveils new innovative desktop CPUs, is causing a stir with its recent announcement of the 14th-generation Raptor Lake processors. Rumors are swirling about the imminent launch of the Intel Core i9-14900KS, touted as the fastest-ever desktop processor, set to debut in March.

Now, let’s assess the prospects of Intel’s rumored Core i9-14900KS processor in the competitive CPU market and the implications of this product launch for INTC investors.

Performance

Launched in October 2023, Raptor Lake CPUs embody a hybrid architecture employing performance and efficiency cores. INTC’s rumored Core i9-14900KS CPU boasts eight high-performance Raptor Cove cores, 16 energy-efficient Gracemont cores, and a 68MB cache, enhancing computational prowess and multitasking capabilities.

The forthcoming CPU showcases a higher default TDP of 150W compared to its predecessors. Also, it achieves a maximum turbo clock of 6.2 GHz, surpassing the 19400K and 19400KF models by 200 MHz. The enhancement is expected to bode well for performance-intensive tasks and demanding applications.

Nonetheless, a significant drawback looms over this final addition to the LGA 1700 socket range of CPUs: an unprecedented power draw. Leaks suggest the chip may consume up to 400W under heavy loads, necessitating robust cooling solutions and ample power supply provisions.

Acquiring sufficient Raptor Lake Refresh processors capable of operating at exceptionally high clocks should pose minimal challenges, given INTC’s substantial production capacity. However, the potential exorbitant power draw raises concerns regarding enthusiast adoption, necessitating formidable cooling solutions to mitigate heat dissipation concerns.

That being said, the Core i9-14900KS CPU, with its advanced specifications and outstanding performance, may initially boost INTC's stock due to enhanced anticipation but could face scrutiny due to concerns regarding power draw.

Pricing

A recent leak has unveiled the anticipated price of INTC’s upcoming flagship gaming CPU, the Core i914900KS. Priced at a staggering €752 including VAT ($812.90) and €640 without ($691.83), it surpasses its predecessor, the 14900K, by €146 ($157.83). The revelation stems from a French online retailer, indicating a significant price hike.

Multiple European retailers are now listing INTC’s forthcoming Core i9 14900KS CPU. Leakers are showcasing both boxed and tray versions at €768 ($830.20) and €752 ($812.90) on the French platform PC21. While seemingly high, a $699 price tag seems feasible considering a direct USD to Euro conversion, aligning with earlier models’ pricing.

From an investor perspective, the pricing strategy could have both positive and negative implications. On the one hand, if customers are willing to pay the listed prices for the Core i914900KS processor, it could lead to increased revenue by capturing a large portion of the market demand and potentially higher stock prices.

Investors may view this as a sign of INTC’s ability to command premium pricing for its products, which could enhance shareholder value.

On the other hand, there’s a risk that the higher price could deter some consumers from purchasing this new Intel processor, mainly if competitive products offer similar specifications and performance at a lower cost. If sales fail to meet the company’s expectations or if there’s backlash from consumers over the pricing, it could negatively impact INTC’s financial performance and, consequently, its stock price.

Consumer Demand

Consumer demand for Core i9-14900KS CPU will likely remain robust, driven by limited supply expectations. Reports suggest it will be a limited edition, heightening its exclusivity and desirability among tech enthusiasts.

Despite potential bans on other INTC CPUs in Germany, the Core i9-14900KS is expected to be available globally. The imminent release of this Special Edition CPU is further supported by tests conducted on production units, indicating an impending official announcement.

The scarcity factor combined with the promising performance of the Core i9-14900KS is likely to create a strong demand among consumers, driving the company’s revenue streams and growth.

Competitive Landscape

INTC faces new challenges from emerging Asian competitors like Taiwan Semiconductor Manufacturing Co. (TSM) and Samsung Electronics Co., establishing their market position in the U.S. However, the Biden Administration’s proposed $10 billion subsidy could bolster INTC’s U.S. presence, supporting CEO Pat Gelsinger’s lobbying efforts.

Gelsinger is spearheading INTC’s push for government backing, which is crucial for its ambitious projects: a $20 billion Ohio facility, a $20 billion expansion in Arizona, and a $3.50 billion investment in New Mexico. The endeavors hinge on securing funding, which is indicative of INTC's strategic focus and future direction.

Moreover, NVIDIA Corporation (NVDA) is venturing into custom processors for cloud and AI amid a surging demand for AI chips. INTC Foundry Services could emerge as a viable alternative for custom processors, as suggested by analysts at Bank of America.

INTC aims for significant growth in its foundry business, eyeing the second-largest global position by 2030, according to Stuart Pann, the SVP and GM of Intel Foundry Services.

Bottom Line

Although not the highest-valued semiconductor company on Wall Street, INTC leads in revenue, according to Gartner Inc. (IT). While yet to be confirmed, rumors strongly suggest the impending release of a Core i9 KS special edition. The company is strategically allowing the current Core i9-14900K time to flourish, potentially enhancing the special edition’s quality.

INTC reported strong performance in the fourth quarter of fiscal 2023. It posted earnings per share of $0.63, surpassing analysts’ estimate of $0.22. Additionally, the company’s revenue totaled $15.41 billion, compared to the consensus estimate of $15.17 billion for the quarter ending in December.

However, concerns linger regarding INTC’s outlook for the ongoing quarter. The company expects a fiscal 2024 first-quarter net loss of $0.25 per share on $12.20-13.20 billion in sales.

Moreover, INTC CEO Pat Gelsinger has asserted that the core businesses, including PC and server chips, are expected to perform at the lower end of the company’s seasonal range in the current quarter. Overall sales are anticipated to decline due to weaknesses in subsidiaries and revenue decreases from other divested businesses.

On top of it, INTC has been aggressively cutting costs by implementing workforce reductions and divesting smaller business segments. In the past year, the company announced plans to spin off its programmable chip unit following the transformation of its self-driving car subsidiary, Mobileye Global Inc. (MBLY), into an independent entity in 2022.

CFO David Zinsner disclosed that the company successfully reduced costs by $3 billion last year, and it divested or sold off five different business lines. While such initiatives may enhance long-term efficiency, short-term impacts on financial performance and stock valuation are uncertain.

Institutional adjustments to INTC holdings further underscore mixed market sentiment. While some institutions are increasing their positions, others are decreasing or exiting entirely, conveying a mixed sentiment among investors and volatility ahead.

Out of 2,846 institutional holders, 1,274 increased their positions. Moreover, 406 holders initiated new positions, acquiring 32,935,008 new shares. However, 1,306 institutional holders have decreased their positions, with 104 holders ultimately selling out their positions, disposing of 17,276,625 shares.

Despite its leading revenue status and potential strategic product releases, Intel’s outlook for the first quarter of 2024 falls short of analysts' expectations. Given these factors, it could be wise to wait for a better entry point in this stock.

Is There Surprising Money to Be Made in Mobileye Global (MBLY)?

Posted on by The INO.com Team

Intel Corporation (INTC) CEO Pat Gelsinger acquired 3,600 shares of Mobileye Global Inc. (MBLY) stock at an average per share price of $27.75 on January 29, according to Form 4 filing dated January 31. The transaction was worth $99,915 in total. After this purchase, Gelsinger now owns around 129,095 shares through his trust.

Pat Gelsinger has purchased MBLY’s shares four times separately since the company became publicly traded in October 2022. Excluding the most recent one, his last purchase was on October 27, 2023, when he acquired 2,845 shares at an average per-share price of $35.18.

Meanwhile, Director Saf Yeboah-Amankwah recently reported an insider buy. As per Form 4 filling, on February 1, Yeboah-Amankwah bought 940 shares at an average per-share price of $25.67, bringing his total stake in MBLY to 48,459 shares. The recent transaction marks Yeboah-Amankwah’s second purchase of MBLY stock since it started trading publicly.

On October 28, 2022, Yeboah-Amankwah acquired 47,519 MBLY shares at an average per share price of $21.

Overall, during the past year, Mobileye insiders have sold $1.57 billion worth of shares while purchasing $1.32 million worth of shares. In June 2023, Intel sold about $1.5 billion from its MBLY stake. Even after the sale, Intel owned 98.7% of Mobileye’s voting shares, a decline from 99.3%.

Market participants closely watch insider activity, as the transactions can reflect existing sentiment around the prospect of the business. Typically, investors get a confidence boost in the stock when there are signs of solid insider buying. Even Mobileye’s short-term challenges didn’t stop Pat Gelsinger from making the recent purchase, as he could be confident about the company’s long-term outlook.

Moreover, Goldman Sachs analyst Mark Delaney has maintained his bullish stance on MBLY stock, giving it a Buy rating despite the company’s bleak 2024 guidance. He pointed out that management’s lower outlook for 2024 is due to supply chain-related customer inventory adjustments and specific production levels from Original Equipment Manufacturers (OEMs).

Delaney looks beyond the near-term challenges and focuses on Mobileye's long-term potential. He remains optimistic about future growth and cash generation prospects. The shift toward high-value solutions such as SuperVison and Chauffeur would position MBLY for growth in the long run.

However, despite attractive insider buying lately, MBLY’s shares are down more than 15% over the past month and have declined nearly 31% over the past six months.

Now, let’s take a closer look at several factors that could impact the stock’s performance in the near term:

Latest Developments

On January 22, 2024, HiRain Technologies, a system provider of intelligent driving solutions to automakers in China, announced the mass production of the first Mobileye EyeQ™6 Lite-based ADAS system, scheduled to debut in China in the second quarter of this year.

The newest member of MBLY’s systems-on-chip portfolio, EyeQ6, is engineered to redefine performance and efficiency in core and premium ADAS offerings. EyeQ6 Lite features Mobileye’s vision-based sensing technology and excels in real-time detection and analysis of its surroundings. The company’s partnership with HiRain reflects its shared vision for high-quality automotive innovations.

Also, on January 9, MBLY expanded its existing relationship with Mahindra & Mahindra Ltd. (M&M), an Indian-based leader in automotive, farm and services businesses. Mobileye will collaborate with M&M to introduce several solutions based on Mobileye’s next-gen EyeQ™6 systems-on-chip and sensing and mapping software, including an intent to develop a full-stack autonomous driving system.

“As more advanced models emerge, we see great opportunities for growth in India and look forward to executing with Mahindra to bring Mobileye SuperVision-based services to one of the most challenging driving environments in the world,” said Mobileye CEO Prof. Amnon Shashua.

Robust Last Reported Financial Results

For the fourth quarter that ended December 31, 2023, MBLY reported revenue of $637 million, beating analysts’ estimate of $633.79 million. This compared to the revenue of $565 million in the same quarter of 2022. The company’s adjusted gross profit was $439 million, an increase of 5.5% year-over-year.

The company’s adjusted operating income rose 13.8% from the prior year’s quarter to $247 million. Its adjusted net income rose 260.3% year-over-year to $228 million. It posted adjusted earnings per share of $0.28, compared to the consensus estimate of $0.27, and up 3.7% year-over-year.

Furthermore, Mobileye’s cash and cash equivalents stood at $1.21 billion as of December 30, 2023, compared to $1.02 billion as of December 31, 2022. The company’s current assets were $2.07 billion versus $1.52 billion as of December 31, 2022.

“Our fourth quarter performance was very strong across the board but is understandably overshadowed by the inventory build-up at our customers which will impact our growth in 2024,” said MBLY’s CEO Amnon Shashua.

Inventory Issues Prompt Revenue Warning

Mobileye, an Israel-based autonomous driving technology company, warned that customer orders for auto chips would fall dramatically short of the prior year’s quarter.

The company said that automakers built up on Mobileye’s chips to avoid part shortages after the global supply glut crisis that persisted through 2021 and 2022 hampered manufacturing.

“As supply chain concerns have eased, we expect that our customers will use the vast majority of this excess inventory in the first quarter of the year,” MBLY said in its preliminary full-year outlook. The excess inventory reflects a pullback in demand from so-called Tier 1 customers, as they will not be placing orders for new chips at the same level they did in last year’s quarter.

For the first quarter of 2024, MBLY expects revenue to be down about 50%, as compared to the 459 million of revenue reported in the first quarter of 2023. Also, the company currently thinks that over the remainder of the year, the revenue will be impacted by inventory drawdowns to a much lesser extent.

The self-driving technology company anticipates lower-than-expected volumes in the EyeQ® SoC business, which will temporarily impact its profitability. Like revenue, MBLY’s first-quarter profit levels are expected to be considerably below the subsequent quarters.

Mobileye expects its first-quarter 2024 operating loss to be in the range of $257 million to $242 million. Excluding amortization of intangible assets and stock-based compensation, the company’s adjusted operating loss is projected to be in the range of $80 million to 65 million.

For the fiscal year 2024, MBLY expects revenue to be between $1.83 billion and $1.96 billion. Its full-year operating loss is anticipated to be in the range of $468 million to $378 million. Also, the company's adjusted operating income will be in the range of $270 million to $360 million.

Mixed Analyst Estimates

Analysts expect MBLY’s revenue for the first quarter (ending March 2024) to decline 49.6% year-over-year to $230.71 million. The company is expected to report a loss per share of $0.06 for the ongoing quarter. However, Mobileye has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

For the fiscal year ending December 2024, Street expects Mobileye’s revenue and EPS to decrease 8.5% and 51.9% year-over-year to $1.90 billion and $0.39, respectively. However, the company’s revenue and EPS for the fiscal year 2024 are expected to increase 42.4% and 102.6% from the previous year to $2.71 billion and $0.80, respectively.

Extremely Stretched Valuation

In terms of forward non-GAAP P/E, MBLY is currently trading at 69.15x, 337% higher than the industry average of 15.82x. The stock’s forward EV/Sales of 10.90x is 793.5% higher than the industry average of 1.22x. Similarly, its forward EV/EBITDA of 53.76x is 444.2% higher than the industry average of 9.88x.

Moreover, the stock’s forward Price/Sales multiple of 11.52 is significantly higher than the industry average of 0.90. Also, its forward Price/Cash Flow of 47.56x is 367.8% higher than the industry average of 10.17x.

Decelerating Profitability

MBLY’s trailing-12-month gross profit margin of 50.36% is 42.1% higher than the 35.44% industry average. However, the stock’s trailing-12-month EBIT margin and net income margin are negative 1.59% and negative 1.30% compared to the industry averages of 7.68% and 4.66%, respectively.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 0.18%, negative 0.14% and negative 0.17% unfavorably compared to the respective industry averages of 11.73%, 6.15%, and 4.12%. Also, its trailing-12-month asset turnover ratio of 0.13x is 86.4% lower than the industry average of 0.99x.

Bottom Line

MBLY beat earnings and revenue analysts’ estimates in the fourth quarter of fiscal 2023. However, the self-driving technology company issued a revenue warning as it deals with excess inventory.

As per the company, its Tier 1 customers stocked up on chips following the global supply chain crisis that persisted in 2021 and 2022 and are now opting to work with excess inventory, resulting in a significant pullback in demand for its Advanced Driver Assistance Systems (ADAS) products.

Mobileye forecasted first-quarter 2024 revenue to be down nearly 50%, although the company believes inventory drawdowns will impact the revenue to a lesser extent over the balance of the year.

The near-term concerns didn’t stop Intel CEO Pat Gelsinger from purchasing around 3,600 shares of MBLY stock, with Mobileye Director Saf Yeboah-Amankwah joining along. When we notice any attractive insider activity, we shouldn’t react by impulsively buying the stock.

Given MBLY’s significantly elevated valuation, declining profitability, and bleak near-term prospects, as excess inventory concerns would cause declining revenue, it could be wise to avoid this stock for now.

Is Intel (INTC) a Bullish Powerhouse Software Stock to Buy Now?

Posted on by The INO.com Team

Intel Corporation (INTC), a world leader in the design and manufacturing of computing and other related products, reported fiscal 2023 third-quarter results, surpassing analysts’ expectations on the top and bottom lines. Also, the company provided strong fourth-quarter guidance, implying revenue growth for the first time since 2020.

After posting better-than-expected earnings, INTC’s shares surged more than 9% on Friday. Moreover, the stock crossed the 50-day and 200-day moving averages of $35.58 and $32.07, respectively, indicating an uptrend.

The chipmaker posted third-quarter adjusted EPS of $0.41, beating analysts’ estimate of $0.22. INTC’s revenue was $14.16 billion, above the consensus estimate of $13.60 billion. However, it dropped nearly 7.7% year-over-year, marking the seventh consecutive quarter of declining sales.

But INTC told investors last Thursday that it expects revenue to grow again in the current quarter.

The boost to Intel’s earnings was mainly due to gains made by its foundry business and growing interest in AI, signs of a recovery in the PC market, and management’s ability to stay on course for several initiatives it had previously laid out for the company.

“We delivered a standout third quarter, underscored by across-the-board progress on our process and product roadmaps, agreements with new foundry customers, and momentum as we bring AI everywhere,” said Pat Gelsinger, Intel CEO.

“We continue to make meaningful progress on our IDM 2.0 transformation by relentlessly advancing our strategy, rebuilding our execution engine and delivering on our commitments to our customers,” he added.

Gelsinger told analysts on a call that the company would slash costs by about $3 billion this year. CFO David Zinsner said that Intel’s EPS benefitted from controlling expenses, with operating expenses decreasing 15% from a year ago. INTC said it has 120,300 employees, a decline from 131,500 last year.

Now, let’s discuss several factors that could impact INTC’s performance in the upcoming months:

Positive Recent Developments

On October 30, Intel announced its intent to operate Programmable Solutions Group (PSG) as a standalone business. This move will give PSG the flexibility and autonomy to fully accelerate its growth and effectively compete in the FPGA industry, which serves various markets like the data center, communications, industrial, automotive, aerospace and defense sectors. 

“Our intention to establish PSG as a standalone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders. This will give PSG the independence it needs to keep growing share in the FPGA market, differentiating itself with capacity and supply resilience from IFS, and allowing Intel product teams to focus on our core business and long-term strategy,” said Pat Gelsinger.

On September 29, INTC’s new Fabin Ireland began high-volume production of Intel 4 technology, which uses extreme ultraviolet (EUV) technology. With its Fab 34 production milestone, Intel executes its plan to users in the future for products such as INTC’s upcoming Intel® Core™ Ultra processors, which will pave the way for AI PCs and future-generation Intel® Xeon® processors coming in 2024.

The company’s rising investments in Ireland and existing and planned investments in Germany and Poland create a first-of-its-kind end-to-end leading-edge semiconductor manufacturing value chain in Europe. They serve as a catalyst for additional ecosystem investments and innovations across the European Union (EU).

Mixed Performance in the Last Reported Quarter

For the third quarter that ended September 30, 2023, INTC’s net revenue decreased 7.7% year-over-year to $14.16 billion. Sales in its Client Computing group, including laptop and PC processor shipments, declined 3% from the year-ago value to $7.90 billion. Intel’s Data Center and AI division, which offers server chips, witnessed a sales drop of 10% year-over-year to $3.81 billion.

The company said it has been seeing competitive pressure and a smaller overall market for server processors. Also, Intel’s Network and Edge segment’s revenue was $1.45 billion, down 32% year-over-year.

INTC’s gross margin came in at $6.02 billion, a decline of 7.9% from the prior year’s quarter. However, the company’s non-GAAP operating income grew 16.3% year-over-year to $1.92 billion. Also, non-GAAP net income attributable to Intel was $1.74 billion or $0.41 per share, compared to $1.53 billion or $0.37 in the previous year’s period, respectively.

As of September 30, 2023, the company’s cash and cash equivalents stood at $7.62 billion versus $11.14 billion as of December 31, 2022.

Mixed Historical Performance

INTC’s revenue has declined at a CAGR of 12.2% over the past three years. Its EBITDA has decreased at a 39.3% CAGR over the same period. However, the company’s tangible book value and total assets have improved at respective CAGRs of 22.5% and 9.1% over the same timeframe.

PC Market Showing Signs of Recovery

After two years of steady declines due to COVID-related slowdowns, inflationary pressures, and higher interest rates, the PC industry appears to be showing signs of life, which would be a boon for INTC.

“There is evidence that the PC market’s decline has finally bottomed out,” said Mikako Kitagawa, Research Director at Gartner.

“Seasonal demand from the education market boosted shipments in the third quarter, although enterprise PC demand remained weak, offsetting some growth. Vendors also made consistent progress towards reducing PC inventory, with inventory expected to return to normal by the end of 2023, as long as holiday sales do not collapse,” she added.

According to preliminary results by Gartner, worldwide PC shipments totaled 64.3 million units in the third quarter of 2023, down 9% year-over-year. While the third quarter’s results marked the eighth consecutive quarter of decline for the global PC market, Gartner expects the market to begin recovery in the fourth quarter of 2023.

Furthermore, the agency projects 4.9% growth for the global PC market for next year, with growth expected in both the enterprise and consumer segments.

Solid Fourth-Quarter Guidance

The company’s fiscal 2024 fourth-quarter guidance implies revenue growth for the first time since 2020. Intel expects revenue to come between $14.60 and $15.60 billion. Non-GAAP EPS attributable to Intel is expected to be $0.44 for the fourth quarter.

Mixed Analyst Estimates  

Analysts expect INTC’s revenue to increase 7.5% year-over-year to $15.09 billion for the fourth quarter ending December 2023. The consensus earnings per share estimate of $0.45 for the ongoing quarter indicates a 346.7% year-over-year improvement. Moreover, the company has topped the consensus revenue estimates in three of the trailing four quarters.

However, the company’s revenue and EPS for fiscal year 2023 are expected to decline 14.7% and 48.5% year-over-year to $53.76 billion and $0.95, respectively.

For 2024, Street expects INTC’s revenue and EPS to grow 13% and 98.8% year-over-year to $60.73 billion and $1.89, respectively.

Bottom Line

Although INTC’s third-quarter earnings and revenue beat analyst estimates, its revenue declined from the year-ago period. After reporting better-than-expected earnings, primarily driven by growth in its foundry business, rising interest in AI, and signs of a recovery in the PC market, the chipmaker expects revenue to grow in the fourth quarter.

While the PC market is recovering after two years of sales declines, there could be a delay in the full recovery of demand for PCs due to prevailing macroeconomic uncertainties. Also, Intel continues to grapple with increased competition and production challenges that could limit the potential for gains in its stock in the near term.

Given its mixed financials and uncertain near-term prospects, it could be wise to wait for a better entry point in the stock.