In this piece, I have evaluated two chip stocks, Intel Corporation (INTC) and Monolithic Power Systems, Inc. (MPWR), to determine which holds the better long-term investment opportunity. But first, let’s take a quick look at the chip industry landscape.
The semiconductor industry is projected to experience strong growth in the foreseeable future as it caters to the rising need for semiconductor materials in emerging technologies like artificial intelligence (AI), autonomous driving, the Internet of Things, and 5G. This growth is fueled by rising demand for power-efficient devices, and the increasing prevalence of wireless and portable electronic products.
Moreover, the Semiconductor Industry Association (SIA) announced that global semiconductor industry sales totaled $137.70 billion during the first quarter of 2024, up 15.2% compared to the first quarter of 2023. The Semiconductor Industry is expected to grow at a CAGR of 10.9% to reach $1.21 trillion by 2029.
Given this backdrop, let’s compare two Semiconductor & Wireless Chip stocks, Intel Corporation (INTC) and Monolithic Power Systems, Inc. (MPWR), to understand why MPWR is a better pick.
The Case for Intel Corporation
Intel Corporation (INTC) designs, develops, manufactures, markets, and sells computing and related products and services worldwide. It operates through Client Computing Group; Data Center and AI; Network and Edge; Mobileye; and Intel Foundry Services segments. Its market cap currently stands at $128.09 billion.
INTC’s stock has declined 21.5% over the past month to close the last trading session at $30.09.
On May 11, 2024, INTC announced that it had surpassed 500 AI models running optimized on new Intel Core Ultra processors, the industry’s premier AI PC processor available in the market, featuring new AI experiences, immersive graphics, and optimal battery life.
On April 17, INTC announced that it had built the world's largest neuromorphic system. Code-named Hala Point, a large-scale neuromorphic system, initially deployed at Sandia National Laboratories, utilizes Intel’s Loihi 2 processor, aims at supporting research for future brain-inspired AI, and tackles challenges related to the efficiency and sustainability of today’s AI.
In terms of forward EV/EBITDA, INTC is trading at 10.97x, 26.5% lower than the industry average of 14.93x. However, its forward EV/EBIT of 31.73x is 54.9% higher than the 20.48x industry average. The stock’s forward non-GAAP P/E of 27.34x is 16% higher than the industry average of 23.56x.
INTC’ trailing-12-month EBITDA margin and net income margin of 19.01% and 7.36% are 92.5% and 218.9% higher than the industry averages of 9.87% and 2.31%, respectively. However, the stock’s trailing-12-month asset turnover ratio of 0.29x is 51.8% lower than the industry average of 0.61x.
During the first quarter that ended March 30, 2024, INTC’s net revenue increased 9.8% year-over-year to $12.72 billion. Its gross margin stood at $5.22 billion, up 28.2% year-over-year. However, its non-GAAP net income came in at $759 million compared to a loss of $169 million in the previous-year quarter. Also, its net income per share came in at $ 0.18 compared to a loss per share of $0.04 in the previous-year quarter.
Analysts expect INTC’s revenue for the second quarter (ending June 2024) to increase marginally year-over-year to $13.07 billion. However, the company is expected to report an EPS of $0.11 for the same quarter, representing a decline of 18.2% year-over-year.
INTC’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Momentum and Value. INTC is ranked #70 out of 92 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings I’ve just highlighted, you can see INTC’s ratings for Growth and Sentiment, Stability, Sentiment, and Value here.
The Case for Monolithic Power Systems, Inc.
Monolithic Power Systems, Inc. (MPWR) engages in the design, development, marketing, and sale of semiconductor-based power electronics solutions for the storage and computing, automotive, enterprise data, consumer, communications, and industrial markets. It has a market cap of $34.95 billion.
MPWR’s stock has gained 76.4% over the past year to close the last trading session at $708.02.
On February 7, MPWR acquired Axign B.V., a Netherlands-based fabless semiconductor startup that specializes in programmable multicore DSP (digital signal processors). Axign’s audio processors demonstrate near-zero distortion signals, with significantly reduced power consumption for automotive and consumer audio systems.
MPWR’s forward EV/EBIT of 45.92x is 124.2% higher than the 20.48x industry average. The stock’s forward non-GAAP P/E of 53.68x is 127.88% higher than the industry average of 23.56x.
MPWR’ trailing-12-month EBITDA margin and net income margin of 26.90% and 22.44% are 172.5% and 872% higher than the industry averages of 9.87% and 2.31%, respectively. The stock’s trailing-12-month asset turnover ratio of 0.76x is 25.5% lower than the industry average of 0.61x.
During the first quarter that ended March 31, 2024, MPWR’s revenue increased 1.5% year-over-year to $457.89 million. Its gross profit stood at $252.44 million in the same quarter. However, its non-GAAP net income and non-GAAP EPS came in at $137.49 million and $2.81, down 5.8% and 6.3% year-over-year, respectively.
Analysts expect MPWR’s revenue for the second quarter (ending June 2024) to increase 11.2% year-over-year to $490.51 million. The company is expected to report an EPS of $3.07 for the same quarter, representing an increase of 8.8% year-over-year. MPWR has an impressive earnings history, as it surpassed the consensus EPS and revenue estimates in all four trailing quarters.
MPWR’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to a Neutral in our proprietary rating system.
The stock has a B grade for Momentum, Sentiment, and Quality. MPWR is ranked #46 same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see MPWR’s ratings for Growth, Stability, and Value here.
Analyzing Long-Term Chip Investment Opportunities in Intel (INTC) and Monolithic Power Systems (MPWR)
The semiconductor sector is experiencing a swift expansion as semiconductors are becoming the fundamental components of contemporary technology. Both INTC and MPWR stand to capitalize on these burgeoning semiconductor industry trends.
However, MPWR presents a better long-term potential, given its superior analysts’ estimates and price performance compared to INTC.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Semiconductor & Wireless Chip industry here.
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MPWR shares were unchanged in premarket trading Friday. Year-to-date, MPWR has gained 12.46%, versus a 10.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Analyzing Long-Term Chip Investment Opportunities in Intel (INTC) and Monolithic Power Systems (MPWR) StockNews.com
