Intel: Can Investors Expect Better Times Ahead?

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Jan 27, 2015
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Intel (INTC, Financial) reported solid numbers for the fourth quarter that came above the street expectations. Both profit and revenue grew year over year, which was mainly driven by higher sales of server chips and chips for personal computers. However, the fun was slightly offset by a weak guidance for the first quarter that edged below the consensus estimate . But in the long run Intel seems to be well on track to carry its growth forward.

What next

During the past one year, its focus was to stabilize the PC business and the company achieved significant ground in this regard, with 4% increase in revenue, while operating profit increased by 25%. Also, it launched Broadwell on the world’s first 14-nanometer manufacturing process. In spite of the initial challenges, Intel developed it into most compelling new designs including Ultrabooks, Chromebooks and PCs.

The Chipmaker also developed a strong hold in the mobile phones and tablets segment, becoming one of the industry’s largest merchant silicon providers in tablets. But it’s only a drop in the ocean and the company has a long way to go. For mobility, its main focus would be to improve profitability in the days ahead. In this direction Intel developed the first SoC in its SoFIA lineup, which is a is a low-cost integrated application processor and baseband chip.

In addition, Intel has taken the computing world into a new dimension with the launch of its wearable devices. The company was pretty late to identify opportunities in the mobile market, and therefore in a bid to become an early entrant in the wearable technology, it is leaving no stone unturned to achieve its goal. The company has partnered with Google Glass, fashion and fitness brands like Fossil, Oakley, Opening Ceremony and others that will further deepen its hold in wearable’s.

Intel was the best performer last year among the large cap technology stocks and with these developments in sight; it has bright prospects in the future.

Considering its strong fundamentals, many analysts are confident of Intel’s future performance. Its gross margin of 65.4% for the quarter was impressive. Moreover, its tight partnership with Microsoft in the PC market provides an edge to Intel in this segment. But now as both these companies are trying to increase their share in the mobile business, this partnership will come in handy. While Microsoft handle’s the software side, Intel will create the building block to push its technology in this segment.

Conclusion

Looking at these developments Intel is on the right track to deliver year over year growth in the coming years. It currently has a trailing P/E of 17.36 compared to the industry P/E of 39.89 and its forward P/E looks even more impressive at 13.75. The stock rose considerably in the past one year and is currently near its 52-week high and considering its future prospects we could see more upside to this stock.