JHVEPhoto/iStock Editorial via Getty Images Investment Thesis I rate Intel Corporation ( INTC ) with a Sell. I am not holding the stock, and I have no intention to buy it at the current levels. At the same time, however, I am not a shorter of the company, and I do not believe that the company will fail in its announced and ongoing turnaround. I have built my own narrative around the company, and I...
JHVEPhoto/iStock Editorial via Getty Images Investment Thesis I rate Intel Corporation ( INTC ) with a Sell. I am not holding the stock, and I have no intention to buy it at the current levels. At the same time, however, I am not a shorter of the company, and I do not believe that the company will fail in its announced and ongoing turnaround. I have built my own narrative around the company, and I have run the numbers through a DCF model to derive an implied price for the stock. Intel will continue growing in the next few years, driven by its DCAI segment and by the Intel Foundry, which, as soon as it becomes profitable, will be a key competitive advantage for the company, enabling it to earn a long-run ROIC higher than the cost of capital, thus generating value. I am assuming, also, that the company will be able to produce a positive operating income in the next few years, reaching a ~25% EBIT margin in the long run. However, I obtained an implied share price of $24.36, which is incredibly below the current share price of ~$125, driven by the huge momentum affecting both the company and the broader semiconductor industry. I firmly believe that this stock price cannot be sustained by the company, and it will be corrected sooner or later by the market. My advice here is to take the profits, facing the risk of leaving some money on the table, which I think is better than facing the risk of an important drop. Introduction to the Methodology and the Model I do not define myself as a value investor; however, regardless of the investing philosophy, I think that what differentiates an investment activity from speculation is the act of building a narrative around a stock, a business, or an asset in general and translating this narrative into numbers through assumptions. The DCF is just one of the mathematical tools that enable this practice, and whenever I am in doubt regarding what my opinion is about a stock, I tend to use it, as it forces me to make my assumptions explic...