Intel Corporation

INTC Details

Intel Corporation (NASDAQ: INTC) creates, produces, and distributes cloud, innovative, and connected device solutions for retail, industrial, and consumer markets across the globe. Data Centre Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solution Group (NSG), Programmable Solutions Group (PSG), Client Computer Group (CCG), and other allied divisions are among the company's segments. In addition, it sells platform goods, including central processor units and chipsets, system-on-a-chip and multichip packages, and non-platform or adjacent items like accelerators, boards and systems, connection products, and memory and storage products.

Latest News:

• New Product Launches: INTC announced the launch of new products, developer tools, and technologies for developers on October 27, 2021. It also unveiled new solutions, including a consolidated and more comprehensive Developer Zone, oneAPI 2022 toolkits, and oneAPI Centers of Excellence. All of them are designed to make resources more accessible and development easier across CPU and accelerator platforms.
• Release of 12th Gen Intel Core: On October 27, 2021, INTC introduced the 12th Gen Intel Core processor family, with the debut of six new unlocked desktop CPUs based on its performance hybrid architecture, including the upgraded gaming processor, the 12th Gen Intel Core i9-12900K.

9MFY21 Results:

• Minor Improvement in Topline: INTC reported a slight increase of 1.05% in net revenue to USD 58.50 billion during 9MFY21 (ended September 25, 2021) from USD 57.89 billion during 9MFY20 (ended September 26, 2020).
• Progress in Bottomline: During 9MFY21, net income increased to USD 15.25 billion, up from USD 15.04 billion during 9MFY20.
• Healthy Balance Sheet: As of June 30, 2021, the company had a cash balance (including trading assets and short-term investments) of USD 34.64 billion with a total debt of USD 40.30 billion.

Key Risks:

• Customer Concentration Risk: INTC's three largest clients accounted for 39% and 41% of the company's net revenue in FY20 and FY19, respectively. The company's financial strength may be harmed in the future if it is overly reliant on a few customers for sales.
• Geographic Concentration Risk: Revenue from billings to China, including Hong Kong, accounted for 26% of overall revenue in FY20, with sales outside the US accounting for 79% revenue. As a result, any adverse economic conditions in any of these regions might negatively impact the company's overall performance.

Outlook:

• Q4FY21 Estimates: INTC forecasts its Q4FY21 GAAP sales to be approximately USD 19.2 billion, with a gross margin of roughly 51.4%, as of October 21, 2021. The EPS is expected to be about USD 0.78.
• FY21 Estimates: Its FY21 sales are expected to be around USD 77.7 billion, with a gross margin of 55%. The full-year capital investment is likely to range between USD 18.0 – 19.0 billion, and EPS is expected to be around USD 4.50.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

INTC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

INTC's stock price has fallen 14.79% in the past six months and is currently at the lower-band of the 52-week range of USD 43.61 to USD 68.49. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.13. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 60.60.

Considering the company's robust track record, new product launches, market dominance, and decent balance sheet, we recommend a "Buy" rating on the stock at the current price of USD 49.02, up 1.96% as of October 29, 2021, at 1:35 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Global Payments Inc.

GPN Details

Global Payments Inc. (NYSE: GPN) is a major payments technology company that provides software and services to small and medium-sized businesses worldwide. Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions are its three revenue-generating segments. In over 100 countries across North America, Europe, Asia-Pacific, and Latin America, it services over 1,300 financial institutions and 3.5 million merchant locations. As of October 29, 2021, GPN's market capitalization stood at USD 41.96 billion.

Latest News:

• Collaboration with Rubean: Global Payments Europe (GPE), a subsidiary of GPN, and Rubean AG, a developer of solutions for the financial sector, announced on October 18, 2021, that Rubean's PhonePOS in Hungary had added enterprise capabilities to its small merchant offering. In addition, the adoption of PhonePOS by a large package delivery firm has encouraged its growth.
• Chosen as an Official Commerce Technology Provider: GPN and Mercedes-Benz Stadium, home of the NFL's Atlanta Falcons and Major League Soccer's Atlanta United, introduced GPN as the stadium's official Commerce Technology Provider on September 08, 2021.

H1FY21 Results:

• Growth in Topline: The company's revenue during H1FY21 (ended June 30, 2021) was USD 4.13 billion, up 15.44% YoY from USD 3.58 billion during H1FY20, mainly owing to an increase in transaction volumes.
• Boost in Bottomline: GPN reported a sharp uptick in net income to USD 465.22 million during H1FY21 vs. USD 190.05 million reported during H1FY20, representing diluted earnings per share (EPS) of USD 1.55.
• Improvement in Cashflow from Operations: Net operating cash inflow during H1FY21 was USD 1.11 billion vs. USD 960.29 million during H1FY20.

Key Risks:

• Chargeback losses Risk: GPN faces chargeback losses when merchants refuse or cannot reimburse GPN for chargebacks resolved in its customers' favor. As a result, any increase in chargebacks that the company's merchants do not pay might harm the company's finances and operations.
• Reliance on Financial institutions for settlements: To assist its settlement activities, GPN enlists the cooperation of many financial institutions to provide clearing services. If such financial institutions stop providing clearing services, GPN may no longer offer processing services to its clients, which might significantly impact its financial stability.

Outlook:

• Revenue Estimates: For FY21, GPN forecasts its sales to be in the range of USD 7.70-7.73 billion, up 14-15% YoY.
• EPS Estimates: It also anticipates adjusted earnings per share (EPS) of USD 8.07-8.20, reflecting a 26-28% growth over FY20. This projection implies that the global economy will strengthen during the remainder of the year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GPN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GPN's share price has fallen 33.38% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 141.74 to USD 220.81. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 29.71, indicating an oversold zone. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 176.52.

Considering the significant correction in stock price, strong profitability margins, decent leverage, robust cash-flows, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 142.99, up 0.11% as of October 29, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

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