Thursday’s earnings will be headlined by Intel’s report after the closing bell. The longtime supplier of chips to personal computer makers will likely confirm, once again, that the market for PCs just ain’t so hot right now, even if it improved a bit at the end of 2013, and that it will mostly keep driving shareholder value by, well, buying those shares itself.
Morgan Stanley analysts note that Intel’s forecast for overall unit declines is “more negative than a year ago, and is, in fact, the most negative full year forecast they have ever given,” with an expected decline of 4 percent for the year. While the stock hasn’t been hurting, with a 26 percent advance in 2013, its recent gains put it in range of resistance from $28 to $30 that has acted as a ceiling since early 2004. So, for such a prominent company, Intel has basically been dead money for the better part of a decade now. (It trailed the S&P last year, even with those gains. )
Morgan Stanley notes it prefers the companies with more diversified exposure – industrial, automotive, communications infrastructure “Ultimately, Intel continues to be relatively expensive for a company with reasonably low growth prospects,” they wrote in a research note this week. Still, it’s notable that Starmine sees the stock as a bit undervalued at this time, putting an intrinsic value of $32 a share on the stock.
For years, Intel was the barometer for chipmakers, shifting the entire sector on its words, but its influence in the PC world, while still having an effect on stocks out of Asia, has diminished. That’s because it’s not really a part of the smartphone market and has become more noted for its dividend yield and its plans as a serial repurchaser of its own shares.
The company slowed those purchases in 2013, as the stock price has risen (for 2011 and 2012, Intel was a massive buyback company). It still has the ability to buy back another $3.7 billion in shares under the existing “repurchase authorization limit” after spending $91 billion in the last 23 years on buybacks. Of course, it borrowed $6 billion in 2012 for more buybacks, so this tech giant, once cutting edge, is now more notable for financial engineering.