Three of the ugliest stock charts you'll ever see: Intel, Advance Auto Parts, and Walgreens Boots Alliance; A quick look at Intel
Few things get my value-investor heart racing more than stocks trading at 52-week lows – but one of them is stocks trading at levels not seen for one, two, or even three decades...
Three companies recently hit my radar screen that fit this bill: once-esteemed chip giant Intel (INTC), automotive-parts retailer Advance Auto Parts (AAP), and drugstore chain Walgreens Boots Alliance (WBA).
Looking at the long-term charts of these companies' stocks, these are three of the ugliest you'll ever see...
Intel closed yesterday at $19.40 per share, down 61% this year and down 72% from its most recent high of more than $68 per share in April 2021. Its stock price was at today's levels more than 27 years ago in January 1997 and hasn't been at this level in more than a decade, as you can see in this 30-year chart:
Meanwhile, Advance is down 83% since peaking in January 2022 and is trading at levels not seen in 14 years, as you can see in this chart since its initial public offering ("IPO") in November 2001:
Worst of all, Walgreens is down a staggering 91% since its peak nine years ago and is trading at levels not seen since September 1996, which was 28 years ago. Take a look:
These charts look like the countless ones I've seen over the years of stocks going to zero as companies go bankrupt.
That said, I've sometimes found incredible opportunities among the most hated, beaten-down stocks... but generally only when many (ideally all) of the following conditions are true:
- Modest (rather than catastrophic) declines in revenue and net income...
- Even if it's declining, positive (or at least not too negative) free cash flow (operating cash flow minus capital expenditures, or "capex")...
- A decent balance sheet, which gives a company time to right itself...
- A good sector (a reasonably competitive environment in which other companies are doing well)...
- And new management.
So with this in mind, let's take a quick look at Intel's income statement, cash-flow statement, and balance sheet to see if it might be worth a closer look...
Intel's revenue has plunged – but may be stabilizing – and its profits have fallen to almost zero – but remain positive:
Meanwhile, the company's operating cash flow has plunged while capex has doubled – leading to severe negative free cash flow over the past two and a half years:
Intel always used to have net cash (negative net debt) on its balance sheet through 2015. But then very large and ill-advised share repurchases in 2018, 2019, and 2020, plus paying out more than $5 billion annually in dividends, took the company into a net debt position... which then roughly doubled in the past year and a half due to negative free cash flows. Take a look:
The best thing that can be said about these ugly financials is that Intel isn't yet in a distressed situation.
It still has a roughly $80 billion market cap and more than $10 billion of trailing earnings before interest, taxes, depreciation, and amortization ("EBITDA"). So $22.5 billion of net debt is manageable... but not indefinitely if the company continues to burn $12.6 billion of cash, as it has done in the past 12 months.
That means Intel doesn't just need to stabilize its business at current levels, but actually turn it around.
Can it do so? I'll explore this question next week, after I take a first look at AAP and WBA... so stay tuned!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.