To The Moon

$Intel(INTC)$  

No. 1 Intel

Just over 4 years ago, Intel was worth more than $Advanced Micro Devices(AMD)$   and $NVIDIA Corp(NVDA)$  combined. Today the company is worth just 87 billion and AMD and Nvidia are worth over 2 trillion. That sort of Divergence might seem like a buying opportunity but in Intel's case there is not much to be optimistic about.

Q2 Results

Revenue: - 1% YoY

Net Income TTM: $1.6 billion

FCF TTM: - $13 billion

Risks

Firstly, the company is dealing with slowing PC sales and has fallen behind in AI. 

Secondly, management's guidance for next quarter was even worse. With Revenue expected to fall up to 12%, Intel's plan to turn itself around is to invest aggressively into AI processes and it wants to become a us-based chip foundry to compete with the likes of $Taiwan Semiconductor Manufacturing(TSM)$   and Samsung  but to do so would cost billions of dollars and the company's poor performance is now putting those plans into Jeopardy. 

Lastly, Intel now says it will cut costs by about $10 billion, scrap its dividend and lay off 15,000 workers. That will help short-term profits but without strong investment the company may simply lose more ground against the big leaders like Nvida, AMD and TSMC.

No. 2 $Toast, Inc.(TOST)$  

Toast provides Point of Sales (POS) payment system systems for restaurants. The company typically loses money on its hardware but makes it up through subscriptions and transaction fees every time an order goes through a toast terminal. The company takes a cut and toast has experienced rapid growth in recent years. According to the company's investor Day presentation toast now operates in 112,000 locations with revenue growing 42% last year and 60% the year before. 

Risks

Firstly, POS is an incredibly crowded market. Market competition comes from the likes of shift four payments lightspeed, square, Clover, Revel, Fiserv and many others. That will make it hard for toast to keep growing at the current pace. 

Secondly, the fee that toast takes per transaction is actually quite small. After card processes like Visa take their cut, toast is typically left with 0.5%.

Lastly, despite toast's growth the company is still not profitable reporting a loss of $136 million over the last 12 months.

My opinion

Toast may be worth a look at a lower price but with fears of a recession looming this is probably one to avoid for the foreseeable future.

Conclusion

Those are two stocks to avoid in August 2024 but these are my personal opinions, not financial advice and I hold no position in either stock.