Intel: Tech Stock At A Discount

Analysis

We believe the market is undervaluing Intel (NASDAQ:INTC) shares. The Street seems too caught up in punishing Intel for missing mobile, than rewarding Intel for investing in the IoT. We look past the technical arguments around performance, and focus on the cold hard numbers. Intel’s initiatives to transform the business appear to be taking off. Combine that with a depressed P/E, and a healthy dividend yield, and Intel’s shares look worthy of investment from dividend investors.

Intel’s On-Going Transformation

Intel’s image as one of the world’s preeminent technology companies has lost some of its luster over the past decade with the continuing decline of the personal computer market which account for most of Intel’s PC chip sales.

Until recently, Intel was the world’s largest semiconductor chip maker in terms of sales revenues, a distinction it held since 1992 but lost to Korean chipmaker Samsung (OTC:SSNLF) last July, when it bested Intel’s second quarter 2017 sales. Despite Intel reporting a 14% increase in second quarter revenues, Samsung overtook Intel during the second quarter on account of the Korean company’s strong sales of memory chips used in mobile devices (smartphones and tablet computers).

In its 2016 Annual Report, Intel CEO Brian Krzanich cites the ongoing transformation of Intel from a PC company to “one that powers the cloud and billions of smart, connected computing devices” (the internet of things). Publicly criticized for having failed to make any headway in the lucrative mobile computing market, Intel seeks to evolve into a company that will dominate the market for chips in corporate data centers, which is the backbone of cloud computing, while maintaining its market position in client computing (PC microprocessors and chips). It would also pursue initiatives in the internet of things and the non-volatile memory business areas.

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