The Fed is yet to announce its next rate hike for July. Since inflation soared to a record 9.1% in June, another 75 bps rate hike seems imminent. Consequently, market volatility is rife, as is evident from the CBOE Volatility Index’s 35.7% year-to-date gains.
Amid such circumstances, value investing has a history of outperforming its growth counterparts. Over the past 40 years, a significant portion of value returns has come during rate hike periods.
Furthermore, Bank of America Corp’s (BAC) chief quant Savita Subramanian prefers value over growth, and the bank expects value stocks to outperform growth in the coming years.
Therefore, fundamentally sound value stocks Intel Corporation (INTC), Micron Technology, Inc. (MU), AbbVie Inc. (ABBV), and Cisco Systems, Inc. (CSCO) could be profitable investments amid the ongoing uncertainty.
Intel Corporation (INTC)
An industry leader, INTC designs, manufactures, and sells computer products and technologies worldwide. It operates through CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other segments. INTC creates world-changing technology to enable global progress.
On July 12, 2022, INTC launched the first set of its open-source AI reference kits, which were built in collaboration with Accenture plc (ACN). These kits are designed to make AI more accessible to organizations in the on-prem, cloud, and edge environments and are available on GitHub. The company is expected to release a series of open-source AI reference kits over the next year, which should bolster its revenues.
INTC’s Datacenter and AI segment revenue increased 22.1% year-over-year to $6.03 billion for the first quarter ended April 2, 2022. Its net income came in at $8.11 billion, up 141.4% year-over-year, while its EPS came in at $1.98, up 141.5% year-over-year.
INTC’s forward EV/S of 2.18x is 22.1% lower than the industry average of 2.80x. Its forward P/S of 2.23x is 22.5% lower than the industry average of 2.87x.
Analysts expect INTC’s revenue to grow 2.6% year-over-year to $76.43 billion in 2023. Its EPS is expected to grow 2% year-over-year to $3.49 in 2023. It has surpassed EPS estimates in each of the trailing four quarters. Over the past month, INTC has gained 7.6% to close the last trading session at $40.61.
INTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INTC has an A grade for Value and a B grade for Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #24 out of 94 stocks. Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for INTC.
Micron Technology, Inc. (MU)
MU designs, manufactures, and sells memory and storage products worldwide. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Storage Business Unit; and Embedded Business Unit.
On July 6, 2022, MU announced the commercial and industrial channel partner availability of Micron DDR5 server DRAM to support the industry qualification of next-generation Intel and AMD DDR5 server and workstation platforms. The product’s commercial availability should add to the company’s revenue stream.
On June 30, 2022, MU’s President and CEO Sanjay Mehrotra, said, “We are confident about the long-term secular demand for memory and storage and are well positioned to deliver strong cross-cycle financial performance.”
For the third quarter ended June 2, 2022, MU’s revenue increased 16.4% year-over-year to $8.64 billion. Its non-GAAP net income came in at $2.94 billion, up 35.3% year-over-year. Also, its non-GAAP EPS came in at $2.59, up 37.8% year-over-year.
In terms of its forward EV/S, MU’s 2.09x is 25.4% lower than the industry average of 2.80x. Its forward P/S of 2.22x is 22.6% lower than the industry average of 2.87x.
MU’s revenue is expected to come in at $31.38 billion in 2022, representing a 13.2% year-over-year rise. The company’s EPS is expected to increase 41.3% year-over-year to $8.56 in 2022. In addition, it surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 12% to close the last trading session at $63.64.
MU has an overall B grade equating to a Buy in our POWR Ratings system. It also has an A grade for Value and a B for Quality.
MU is ranked #39 in the Semiconductor & Wireless Chip industry. Click here to get additional MU ratings (Growth, Momentum, Stability, and Sentiment).
AbbVie Inc. (ABBV)
ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company functions across several key therapeutic areas like immunology, oncology, neuroscience, eye care, virology, and gastroenterology.
In July, ABBV announced Health Canada’s approval for its RINVOQ® (upadacitinib, 15 mg), an oral, once-daily selective and reversible JAK inhibitor for the treatment of adults with active ankylosing spondylitis (AS). This is expected to expand the company’s portfolio of treatment options for Canadians.
On July 20, 2022, ABBV and iSTAR Medical SA announced a strategic transaction to develop and commercialize iSTAR Medical's MINIject® device, a minimally invasive glaucoma surgical device. The strategic alliance is expected to be a step forward in the company’s innovation in glaucoma treatment.
ABBV’s net revenues for the first quarter ended March 31, 2022, came in at $13.54 billion, up 4.1% year-over-year. Its net earnings came in at $4.49 billion, up 26.4% year-over-year. Moreover, its adjusted EPS came in at $3.16, up 9.3% year-over-year.
ABBV’s forward EV/EBITDA of 10.39x is 22.8% lower than the industry average of 13.46x. Its forward P/S of 4.38x is 5% lower than the industry average of 4.61x.
Analysts expect ABBV’s revenue to increase 6.2% year-over-year to $59.61 billion in 2022. Its EPS is expected to increase 9.8% year-over-year to $13.94 in 2022. It surpassed EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 26.3% to close the last trading session at $147.75.
It’s no surprise that ABBV has an overall A rating, equating to a Strong Buy in our proprietary POWR Ratings system. In addition, it has an A grade for Quality and a B for Growth and Value.
ABBV is ranked #9 out of the 167 stocks in the Medical – Pharmaceuticals industry. Click here for the additional POWR Ratings for ABBV (Momentum, Stability, and Sentiment).
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China.
On July 21, 2022, CSCO launched a new Webex Wholesale Route-to-Market for Service Provider partners to address the evolving needs of SMBs. This new model is expected to offer greater customer satisfaction for CSCO and its partners.
In June, CSCO launched AppDynamics Cloud, which delivers power and usability in a single, intuitive interface. AppDynamics Cloud supports cloud-native, managed Kubernetes environments on Amazon Web Services (AWS) and is expected to expand to Microsoft Azure, Google Cloud Platform, and other cloud providers in the future.
CSCO’s total revenue increased marginally year-over-year to $12.84 billion for the third quarter ended April 30, 2022. Its net income came in at $3.04 billion, up 6.3% year-over-year, while its EPS came in at $0.73, up 7.4% year-over-year.
CSCO’s forward EV/EBITDA of 8.96x is 28.7% lower than the industry average of 12.55x. Its forward EV/EBIT of 10.01x is 35.5% lower than the industry average of 15.54x.
CSCO’s revenue is expected to increase 3.3% year-over-year to $52.86 billion in 2023. Its EPS is expected to grow 5.4% year-over-year to $3.53 in 2023. Also, it surpassed EPS estimates in each of the trailing four quarters. The stock has gained marginally over the past month to close the last trading session at $44.58.
CSCO's overall B rating equates to a Buy in our POWR Ratings system. Also, it has an A grade for Quality.
CSCO is ranked #8 out of 53 stocks in the Technology - Communication/Networking industry. Click here for additional CSCO ratings (Growth, Value, Momentum, Stability, and Sentiment).
INTC shares were trading at $39.96 per share on Friday morning, down $0.65 (-1.60%). Year-to-date, INTC has declined -21.20%, versus a -15.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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