All things STOCKS

[BigOrangeMojo]

If the people who have run Intel the past 10-20 years ran these companies...

Amazon- Would only be an online bookseller

Netflix - Would only be delivering DVDs

Apple - Would only be selling Macs and ipods

Google - Would only be doing search

 

[Thunder Good-Oil]

Again, this is a company that could not see where this industry was going and I am supposed to subsidize their stupidity. I have no problem giving incentives to companies that will provide a return on the investment. I have another problem giving it to a company thay has consistently been outmanuvered and outexecuted by its competitors.

$20B seems like a lot of Capex but again, they haven't properly invested in the past. At some point, you have to play catch up for your prior underinvestment...

The government would be helping an industry, not a specific company. Intel still has a role as long as PCs are an important component of our business infrastructure. PCs are a lot like terrestrial radio. Not going to disappear overnight.

The most successful companies in the space pivoted toward graphics and owe much of their good fortune on gaming. The pandemic stimulated that industry.

As indicated in my 2nd post, all of INTC’s Q2 loss is accounted for with the inventory write down of a business that they’ve exited. That’s a sunk cost - not from ongoing operations. I don’t expect the dividend to be cut as earnings were about 4x as much immediately before the GAAP inventory adjustment.

 

[Thunder Good-Oil]

If the people who have run Intel the past 10-20 years ran these companies...

Amazon- Would only be an online bookseller

Netflix - Would only be delivering DVDs

Apple - Would only be selling Macs and ipods

Google - Would only be doing search

Intel was a near monopoly with x86 so they haven’t had to evolve as quickly. Their revenue mix is trending away from PC CPUs none-the-less.

Alphabet/Google’s valuation (72%) is actually far more concentrated in advertising/search than INTC’s is in PCs (41%).

Apple’s valuation is 42% iPhone. Watch/TV hardware is 13%. Mac 8%. iPad 6%. Services is the #2 source of revenue (and the valuation) and much of that (approx 20%) is licensing paid to them from Google. App sales is the biggest component of services (about a third of it).

The bottom line is that bottom lines, especially in tech, are highly dependent on the luck of macro economics and uncontrollable market conditions.

 

[BigOrangeMojo]

Intel was a near monopoly with x86 so they haven’t had to evolve as quickly. Their revenue mix is trending away from PC CPUs none-the-less.

Alphabet/Google’s valuation (72%) is actually far more concentrated in advertising/search than INTC’s is in PCs (41%).

Apple’s valuation is 42% iPhone. Watch/TV hardware is 13%. Mac 8%. iPad 6%. Services is the #2 source of revenue (and the valuation) and much of that (approx 20%) is licensing paid to them from Google. App sales is the biggest component of services (about a third of it).

The bottom line is that bottom lines, especially in tech, are highly dependent on the luck of macro economics and uncontrollable market conditions.

You are WAYYY underputting the reasons for Intel's decline. Everyone in the industry saw the shift to mobile, data center, and gaming chips. Everyone except Intel. This isn't bad luck but 10-20 years of strategic incompetence.

While PCs aren't going away as you noted, they will decline and will be purchased in larger numbers by businesses who won't be swayed by branding. Yes, Granny who uses her desktop to log into Facebook might be swayed by Intel's branding, the bulk of OC sales in the future will be made by companies that know Intel is behind the times. We've had this same conversation for years with Intel in the 60s, 50s, 40s and now 30s.

Things may change in the future and the US taxpayer may help finance Intel's path to catch up.

 

[Thunder Good-Oil]

You are WAYYY underputting the reasons for Intel's decline. Everyone in the industry saw the shift to mobile, data center, and gaming chips. Everyone except Intel. This isn't bad luck but 10-20 years of strategic incompetence.

While PCs aren't going away as you noted, they will decline and will be purchased in larger numbers by businesses who won't be swayed by branding. Yes, Granny who uses her desktop to log into Facebook might be swayed by Intel's branding, the bulk of OC sales in the future will be made by companies that know Intel is behind the times. We've had this same conversation for years with Intel in the 60s, 50s, 40s and now 30s.

Things may change in the future and the US taxpayer may help finance Intel's path to catch up.

Intel is unlike all of the rest of the industry that you are using as a comparison. They were a monopoly. It would be dumb for a monopoly to stray far from their core. Same for when the court turned them into a duopoly. Nobody knows how much life remains in their industry. But they appear to be priced for a worse case scenario.

Business leader’s decisions aren’t always perfect. But INTC has billions in the bank and the PC business continues to bring in billions more every year. They are exploring new ways to deploy the capital all the time. MobileEye can be huge if AVs ever get momentum. The shift to domestic and European manufacturing could be a huge advantage as things play out if the globalists don’t win and aren’t able to continue allowing China to control the supply chain.

Intel has their niche. Those that believe the stock has more down side ahead can look elsewhere. Some feel that 4% and the 4x earnings to payout is acceptable for their ongoing operations. 6x earnings indicates that much of the doom and gloom is already priced into the stock and the just published financials put the shares on sale. Those that think they will sink can go with the crowd and buy AMD at 35x and their zero yield.

 

[Velo Vol]

Anybody able to explain this to me?

From what I've seen, the narrative for last week's rally is the belief that the Fed will not raise rates much further, and will start easing early next year. Support for this was found in some ambiguous language in the statement on Wednesday.

For that to be true, we have to believe that inflation is already declining, either due the cycle being near the end, or demand destruction. Either way, the Fed will turn soft.

I don't know about that.

 

[Thunder Good-Oil]

What exactly is the deal with INTC as a company? Are they simply behind NVDA and AMD in terms of the technology?

One big difference is that NVDA and AMD outsource ALL of their manufacturing. Therefore they have had a cost advantage when Taiwan Semi, GlobalFoundries, and the PRC (China) are able to do that reliably and for less than they could do it themselves in-house. GlobalFoundries was actually spun out of AMD when they decided to go Fabless. Interestingly, Intel nearly bought GFS a year ago. Outsourcing was a good decision based on their recent financial performance but it could come back to bite them. China could face pushback for their politics and Taiwan is being threatened by mainland China. Owning the fabrication facilities also has its own set of risks - mainly if not running at near capacity they are very expensive to own.

Intel’s more direct comparisons are Texas Instruments and Samsung as far as combining design plus manufacturing.

Intel is investing in their own foundries in the US and Europe and they will benefit if legislation is enacted to incentivize a trend away from dependence on China.

Intel stock trades at 2x sales. AMD at 7 or 8x sales. NVDA at about 15x sales. Texas Instruments at about 8x sales. IMO Intel’s fall in the equity markets is overdone.

 

[Ernest T. Vol]

I’m completely surprised the DOW is still above 30K with all the financial news pointing downwards? Anybody able to explain this to me?

Market (orange) trades ahead of economy (blue). The eternal question is: where are we on this graph? This current red line is one month old and has moved forward (cycle goes left to right). Opinions vary but I think we are near market bottom and recession.

 

[Firebirdparts]

I gotta admit that's an interesting topic. Here's another view; I forget where I got it:


Here's a guy who tries to figure out where you are:
econ p.i.

The "business cycle" may not really happen any more for some reason, but i wouldn't necessarily bet on that. We'll see.

 

[Velo Vol]

Market (orange) trades ahead of economy (blue). The eternal question is: where are we on this graph? This current red line is one month old and has moved forward (cycle goes left to right). Opinions vary but I think we are near market bottom and recession.

Maybe I'm listening to the wrong people, but the anticipation I keep hearing about is interest rates (Fed loosening), not the bottom of the business cycle.

 

[Firebirdparts]

Maybe I'm listening to the wrong people, but the anticipation I keep hearing about is interest rates (Fed loosening), not the bottom of the business cycle.

It sounds more like you just didn't know you agreed with him.

 

[Ernest T. Vol]

Maybe I'm listening to the wrong people, but the anticipation I keep hearing about is interest rates (Fed loosening), not the bottom of the business cycle.

Yes, a lot of folks are already anticipating loosening. The chip in the gearbox this time is inflation. The fed may need to leave rates higher, longer. Place your bets...place your bets.

 

[Thunder Good-Oil]

Interest rates will reflect the inflationary rate. If inflation normalizes around 3% then the prime rate should stabilize a bit above 3%.

 

[Thunder Good-Oil]

Peleton (PTON). I’ve never liked it. But it now sells under 1x sales. Below $11/share, up from an $8.22 bottom. Down from a $123 52-week high. But lost $6/share. They were a COVID darling. I just saw a housing analyst point out that the trend in new homes has been to include home offices and a exercise rooms. I just find it stupid to subscribe for about $40/month on top of buying equipment.

Also Beyond Meat (BYND) is struggling. $33. Off of the 52-WH of $135. But has bounced off of the low of $18.57 in Q2 (apparently intra-day, the 52-WL is $20.50). Losing $4/share. Still sells for about 5x 2020 sales. BYND is burning through their cash. A billion dollars since the IPO 3 years ago. Almost 2/3rds of that in the 12 months through Q1-22. They partner with Pepsi, McDonald’s, Dunkin’, and Taco Bell but the MCD deal isn’t getting much traction. New Constructs, an equity research firm, says there’s only about 6 months of cash on hand, they’re very small relative to potential competitors, and without significant barriers to entry.

Buy Puts? Or is the likely worst case scenario already priced in?

 

[Thunder Good-Oil]

Wow. Fintech is on fahr today. Sofi (SOFI)(+25%) is dragging Square/Block (SQ), PayPal (PYPL), Affirm (AFRM), Upstart (UPST), Lending Club (LC), and MoneyLion (ML) up 8/9/10% or more.

 

[Firebirdparts]

Peleton (PTON). I’ve never liked it. But it now sells under 1x sales. Below $11/share, up from an $8.22 bottom. Down from a $123

Buy Puts? Or is the likely worst case scenario already priced in?

Worst case scenarios can never be priced in. That is madness. How can you even ask? No individual outcome is ever priced in. Some probability of a worst case scenario (and in fact all scenarios) can be priced in.

This company has a very obvious chance of bankruptcy.

 

[Thunder Good-Oil]

Worst case scenarios can never be priced in. That is madness. How can you even ask? No individual outcome is ever priced in. Some probability of a worst case scenario (and in fact all scenarios) can be priced in.

This company has a very obvious chance of bankruptcy.

“Likely”

 

[Velo Vol]

Yikes, imagine how bad things would have to be for the Fed to issue this.

 

[Velo Vol]

Worst case scenarios can never be priced in. .

It is if the price is $0.

 

[mrorange211]

Jesus the amount of bullish sentiment now is higher than the last year. Lots of people are going to lose everything.

 

[95 Vol Alum]

Jesus the amount of bullish sentiment now is higher than the last year. Lots of people are going to lose everything.

It's going to zero?

 

[Firebirdparts]

I am somewhat guilty of using leverage, but I feel pretty safe, haha.

Leverage is the secret to jumping out a wall street window.

 

[Fun coupon VOL]

I am somewhat guilty of using leverage, but I feel pretty safe, haha.

Leverage is the secret to jumping out a wall street window.

As long as you have 2 to 3 years of cash to sit around and service your debt you are fine.

 

[Velo Vol]

Jesus the amount of bullish sentiment now is higher than the last year. Lots of people are going to lose everything.

It is?

 

[Thunder Good-Oil]

As long as you have 2 to 3 years of cash to sit around and service your debt you are fine.

That’s not how margin works with a brokerage account. Mortgages, credit card debt, car loans - sure. But a margin loan can be called in quickly when equity securities move against you.