Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Why Intel Stock Price is Poised to Double

Companies / Tech Stocks Jun 19, 2013 - 03:13 PM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: The world's largest semiconductor firm's stock has become one of high tech's biggest value traps, which isn't a great place to be for stockholders.

But things are changing and tech investors - all investors -- should take heed.

First let's look at what it means to be a value trap.


On the value side, Intel Corp. (Nasdaq: INTC) has been and continues to be one of the world's most respected chip firms. And it has the kind of profit margins most hardware companies can only dream about.

Not only that, but last year it invested more than $10 billion in research and development, an amount that was seven times that of second-place spender Qualcomm Inc. (NasdaqGS: QCOM).

Intel's very existence is a testament to high tech's exponential growth. After all, it was an Intel co-founder who came up with Moore's Law, which basically says computing power doubles about every two years.

This is an outfit with a long list of technical firsts that is leading the charge into nanoscale and 3D semiconductors. The transistor gates inside its new Ivy Bridge chips measure a mere 22nm long. At that size you could fit 4,000 of them across the width of a human hair.

Here's the trap...

The big-cap leader's legacy and technical chops haven't translated into stock profits.

Over the past five years, not counting its 3.9% dividend, the stock has returned a scant 9%, almost exactly half that of the S&P 500.

So, you have a great company that's still a solid industry player that can't seem to get out of its own way when trying to unlock that value.

But this sleeping giant is about to awaken -- and double the value of its stock.

Reawakened Growth

The first thing on Intel's new agenda is to correct one of the worst blunders it ever made.

I'm talking about how it missed the biggest tech shift since the PC revolution of the mid 1980s -- the Mobile Wave.

Right now, smart phones and tablets are outselling Intel's bread-and-butter PCs by a nearly 5-to1 margin. They're set to capture 35% of the world's $1.35 trillion global tech economy

Now you know one of the reasons why former Intel CEO Paul Otellini decided to retire at age 62, three years ahead of the firm's standard age.

In a recent Intel meeting before he left, Otellini said he regretted not jumping into mobile devices. He also indicated that Intel needed some younger blood at the top.

New Blood

Enter Brian Krzanich. The new CEO is 52 but has logged 30 years at Intel. He joined the firm right out of San Jose State where he got his bachelor's in chemistry.

Coming up the operations side, he knows the challenges Intel faces in making a big move into mobile chips.

More to the point, however, he sees the huge shift in the market and is not about to leave Intel on the sidelines of the mobile revolution.

And he's already made that abundantly clear in his first month.

Just 12 days after assuming his new role, he announced that Intel had acquired the ST-Ericsson unit responsible for creating microchips that allow navigation through GPS satellites. The idea behind the $90 million merger is to embed that tech in smart phone components.

Some Intel watchers have speculated the firm might leverage this move to make its own smart phone.

As a veteran tech investor, I don't believe that's even a remote possibility.

Intel isn't geared up to start selling its own devices.

The last time the company made a foray into selling this kind of stand-alone product, it did not go well.
Making Mobile Waves

Several years ago, the company came up with a forerunner of a Web-centric tablet computer. But it never made it to market, the victim of two main factors.

First was the difficulty of moving quickly in a sprawling chip firm with a $122 billion market cap.

The second was Steve Jobs. As the visionary leader of Apple Inc. (NasdaqGS:AAPL), Jobs figured out the best way to debut a small Web device -- put it inside a smart phone.

With the iPhone eating the market alive, Intel quietly shelved the mobile Web platform.

So, I don't expect Intel try to branch out into a mobile venture. I believe it will stick to its core strength, high-quality semiconductors and sell into the mobile sector.

And a key part of its mobile strategy is to align with Apple's arch-rival Samsung Electronics Co. Ltd. (KRX:005930).

This bold move just gave Intel its biggest mobile win to date. The company will have its Atom line of processor chips inside Samsung's new Galaxy Tab 3.

This is a huge move for the late comer to the party, and Intel is getting lots of buzz in both investing and die-hard tech circles.

Right now, mobile accounts for only 1% of Intel's sales. But the Galaxy gig alone could boost that several fold.

For his part, Krzanich has already said he's looking beyond today's mobile sector. He recently told the New York Times he wants a big slice of the coming era of pervasive computing.

"I look at this world and see all kinds of devices connected to computers, and people connected to it all the time," Krzanich told the paper. He added that, "If you're just talking phones, you're shooting behind the duck."

Given that statement, recent news that the firm's investment arm is backing several types of cutting-edge tech with a $100 million fund makes perfect sense.

Shooting In Front of the Duck

Intel calls this new segment "perceptual computing," something I first wrote about for Money Morning back in February. Over the next three years, Intel says it will invest in firms making software and applications in areas like imaging, gesture and voice control, emotion sensing and biometrics.

Clearly, Krzanich thinks big. And investors are regaining confidence in the storied firm.

Intel is up more than 12% in the last three months. From here, the stock could double in five years.

The math is simple. Selling more mobile chips as well as those used in data centers needed for wireless computing could boost earnings by 60% from this year's projected profits of about $2.05 a share.

That kind of earnings growth could easily push the PE from the current 12.3 to 15, roughly in line with the overall market.

Those factors add up to a potential upside of $49.20 a share compared with the current $24.65. That's a fair price for a firm that has an operating margin of 25% and generates $6 billion a year in free cash flow.

So, tech investors looking for a total return that includes a solid dividend and respectable growth would do well to take their cue from the company's new marketing slogan.

Take a "look inside" the New Intel...

Source :http://moneymorning.com/2013/06/19/why-this-tech-blue-chip-is-poised-to-double/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules