It’s Time to Reconsider Intel Stock

Semiconductor stocks have been on fire in recent years, but Intel Corporation (Nasdaq: INTC) has mostly lagged behind smaller, high-growth competitors. However, now that negative headlines about Intel’s security issues have passed, analysts are warming up to the idea of Intel taking a turn leading the industry higher.

In Intel’s most recent earnings report, the company reported earnings and revenue beats and reassured shareholders that the Meltdown and Spectre vulnerabilities identified in Intel chips in January would not be a long-term concern. In fact, Intel rewarded loyal shareholders with a 10 percent dividend hike.

After a post-earnings rally, Intel stock is up 35.9 percent in the past three years, but it has substantially lagged smaller competitors, such as Advanced Micro Devices (AMD) and Nvidia Corp. (NVDA). AMD stock is up 295 percent in the past three years, while Nvidia stock has skyrocketed 1,030 percent in that time.

The huge rallies in certain chipmakers stocks have led some analysts to raise valuation concerns. But at a price-earnings ratio of just 14.8, Pitt Capital senior portfolio manager Kim Forrest says Intel’s underlying business is strong and its valuation is sound.

“Intel is an all-around well-run company that is making steady gains in the newer areas of drones and autonomous driving,” Forrest says, according to CNBC. “The company’s most recent quarter shows that the competition is not gaining on the high-margin server chips.”

Bank of America analyst Vivek Arya says the competition among AMD, Nvidia and Intel in coming years is far from a zero-sum game.

“Just the top eight cloud service providers are expected to grow [capital expenditures by 30 percent year-over-year in 2018, or by about $16 billion, which provides plenty of opportunity within the $3 billion to $4 billion total growth in data center chip sales for the key processor vendors INTC, AMD and NVDA,” Arya says.

Arya says there is still upside ahead for Intel, even if the stock continues to trade at a 20 percent earnings discount to its peers.

“We believe…

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