Introduction
Intel and Micron are two titans of the semiconductor industry. Both companies design, manufacture, and sell chips that power everything from personal computers and smartphones to cloud data centers and autonomous vehicles.
In this in-depth comparison, we will analyze Intel Corp (NASDAQ: INTC) and Micron Technology (NASDAQ: MU) to see which semiconductor stock offers better risk-adjusted returns for investors. Here is what we will cover:
- Business profiles: size, financials, products, end-markets
- Recent performance and future prospects
- Growth opportunities and risks
- Financial metric comparison: valuation, dividends, profitability
- Stock price forecast and analyst ratings
- Recommendation: which is the better buy today?
Let‘s dive in.
Intel vs. Micron: Business Profiles
Intel and Micron have been leading players in semiconductors for over 30 years. Though they compete in some areas, their core businesses possess more differences than similarities.
Intel‘s Breadth and Scale
As a giant in silicon innovation for over 50 years, Intel is a household name in tech. The company is the world‘s largest semiconductor manufacturer with a market cap of $145 billion.
Intel‘s product portfolio is broad, spanning central processing units (CPUs), graphics processing units (GPUs), chipsets, solid state drives (SSDs), and much more. The company holds strong market share positions across personal computing, data center, IoT, and autonomous driving end-markets.
In 2022, Intel generated $63 billion in sales. However, recent geopolitical issues, supply chain challenges, and stiff competition have impacted financial results. Intel posted a $700 million net loss in 2022 compared to prior year profitability.
Micron‘s Memory Leadership
With a market cap of $73 billion, Micron is about half the size of Intel today. As a pure-play memory and storage company, Micron does not compete directly with Intel on CPUs or chipsets.
Micron is the industry‘s most efficient manufacturer of memory chips like DRAM and NAND flash. The company also sells SSDs and multichip packages. Micron primarily serves original equipment manufacturers in data center, networking, automotive, industrial, and consumer markets.
For fiscal 2022, Micron generated $27 billion in revenue with $4.3 billion in operating profits. However, like Intel, Micron faces risks from market cyclicality and pricing pressures.
Recent Performance and Growth Outlooks
Both Intel and Micron posted disappointing results in 2022 due to weak personal computer demand and memory chip oversupply issues. However, analysts see better days ahead based on new product cycles and stabilized market dynamics.
Intel: Regaining Its Footing
Despite its scale, Intel posted its first annual revenue decline since 2015 due to share losses in PC and data center markets. New CEO Pat Gelsinger aims to regain process leadership after manufacturing delays, while growing foundry services and the AI/autonomous driving opportunity.
Most analysts forecast Intel‘s sales declining ~10% in 2023 followed by over 5% average annual growth from 2024-2026. Strategic roadmaps around GPUs, next-gen CPUs, foundry services, IoT, and Mobileye ADAS solutions support the longer-term rebound case.
Micron: Managing Cyclicality
Micron‘s top and bottom lines remain heavily influenced by ups and downs in memory chip pricing and demand. However, the company sees cloud, AI/ML, 5G, and automotive driving above-trend long-term bit demand for memory and storage.
Consensus forecasts call for a 26% revenue drop in fiscal 2023 due to memory oversupply and demand weakness. However, analysts see Micron‘s sales rebounding over 25% in fiscal 2024 on better memory market conditions and heavy R&D investment starting to pay off.
Growth Opportunities and Risks
Intel and Micron target similar high-growth opportunities in areas like data center, AI, 5G networks, IoT devices, cloud computing, and autonomous driving. However, competitive threats, cyclical risks, high costs, and execution challenges remain.
Intel‘s Opportunities
CEO Pat Gelsinger aims to restore Intel‘s reputation for silicon leadership and operational excellence. If Intel delivers on its 2025 goal of regaining process parity in advanced chips, it can recapture lost share in PCs and servers.
The company is also betting heavily on pursuing a >$100 billion foundry services opportunity. On top of that, Intel‘s Mobileye subsidiary leads in autonomous vehicle technology and looks to power over 270 car OEM platforms by 2030.
Finally, Intel‘s accelerated focus and investments into graphics (Arc GPUs) and AI silicon opens large new target markets in advanced computing.
Micron‘s Opportunities
As computing power grows exponentially, so does demand for high-performance memory and fast storage solutions. Micron sees its addressable market expanding from $88 billion today to $292 billion by 2030.
The company aims to lead in next-gen memory technologies like GDDR6X, DDR5, and persistent 3D XPoint. Micron also plans to ramp 96-layer NAND production to lower costs. Lastly, Micron is expanding its presence in key secular growth markets like electric vehicles and industrial IoT.
Intel‘s Risks
Though Intel invests over $15 billion in capex and R&D annually, execution risks remain high given its breadth. Migrating to advanced node processes has proven difficult as competitors like TSMC and Samsung have pulled ahead.
Meanwhile, Intel faces intense rivalry across business segments from players like AMD, Qualcomm, Nvidia, and Arm Holdings. Regaining sustainable leadership in process technology and product performance seems essential for Intel re-igniting growth.
Micron‘s Risks
As a commodity memory and storage supplier, Micron‘s profits swing heavily based on small changes industry supply/demand. While long-term demand looks healthy, predicting cyclical downturns remains challenging.
On the competitive front, South Korean rivals Samsung and SK Hynix present constant threats to market share. As Chinese companies ramp domestic memory production, trade and pricing risks have heightened as well recently.
Financial Metrics and Valuation Comparison
Looking beneath the surface of Intel and Micron‘s strategies, how do current financial metrics and valuation multiples stack up against each other? Which stock appears priced cheaper relative to underlying fundamentals today?
| Intel Corp. | Micron Technology | |
|---|---|---|
| Market Cap | $145 billion | $73 billion |
| Annual Revenue Growth (5-Year) | 2.9% | 12.4% |
| Operating Margin | 10.8% | 28.7% |
| Earnings Growth (3-5 Year Estimate) | 1.9% | 7.4% |
| Free Cash Flow Yield | 5.0% | 12.5% |
| Dividend Yield | 3.5% | 0.7% |
| P/E Ratio (NTM) | 15x | 9x |
*Data compiled from market data, CFRA, and Yahoo Finance
Based on growth, margins, cash flows, and dividends, Micron looks stronger financially. Intel‘s larger scale and breadth support its superior dividend yield.
However, Intel trades at a higher trailing P/E multiple compared to Micron based on next-twelve-month earnings estimates. This suggests the market sees better near-term rebound prospects for Micron.
Stock Price Forecasts and Analyst Ratings
Incorporating analyst expectations into our comparison provides useful insight into expert views on Intel and Micron‘s risk/reward outlooks. Which stock do Wall Street analysts favor right now?
Intel: Hold Rating, Potential Upside
Among 45 analysts covering Intel stock, the median 12-month price target stands at $44, representing 26% upside from current levels. However, the average rating is neutral as analysts wait to see credible execution on the company‘s multi-year turnaround plan.
Given execution risks, analysts forecast Intel‘s EPS declining over 30% in 2023 before rebounding to 20%+ growth in 2024 on revenue stabilization. Profitability metrics look set to remain challenged near-term.
Micron: Buy Rating, High Upside Potential
Micron garners more enthusiastic analyst support, with a consensus overweight rating among 35 covering brokers. The average stock price target of $87 implies over 35% upside for shares in the next 12 months.
Analysts forecast Micron‘s earnings declining by 12% in fiscal 2023 due to memory market surplus before rebounding to 61% growth in fiscal 2024 on cyclical recovery tailwinds. The long-term earnings growth forecast stands at a healthy 15% onsolid secular demand drivers.
Recommendation: Micron Offers Better Risk-Reward
After comparing critical aspects of Intel and Micron‘s businesses, our recommendation lands on Micron Technology as the better semiconductor stock today for long-term investors based on:
- Stronger growth, margins, cash flows over last 5 years
- Lower P/E multiple reflecting healthier near-term outlook
- Higher free cash flow and dividend growth potential
- Higher 12-month stock price upside projected
Micron does face inherent cyclicality issues in memory markets. However, with a strong product portfolio catering to vital tech growth trends, prudent cost management, and reasonable valuation, Micron looks poised to outperform Intel over the next 3-5 years.
That said, if Intel shows concrete process node improvements and execution on GPU, foundry, AI, and autonomous vehicle opportunities, its stock could regain lost luster. For now though, we rate Micron stock as the better risk-adjusted semiconductor buy.
