Intel Stock Price Now Below Intrinsic Value of Core Business: A Wall Street Transcript Interview with Willem Schilpzand, an Associate Portfolio Manager and Analyst at Alpine Capital Research

Wall Street Transcript

67 WALL STREET, New York - November 25, 2013 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Large-Cap, Deep-Value - Bottom-Up Stock Selection - Repurchase Activity - Value Oriented Strategy - Investment Risk Management Strategies - High-Quality Blue-Chip Companies - Free Cash Flow Yield - Alternative Investing, Ultimate Returns

Companies include: Humana Inc. (HUM), Unitedhealth Group, Inc. (UNH), Intel Corporation (INTC), Microsoft Corporation (MSFT), Google Inc. (GOOG), Taiwan Semiconductor Manufactu (TSM), Berkshire Hathaway Inc. (BRK-A)

In the following excerpt from the Investing Strategies Report, an expert analyst discusses the outlook for the sector for investors:

...Another investment worth highlighting is Intel (INTC). Intel is the world's largest semiconductor company, and their microprocessors and chipsets dominate the PC industry with 85% share and the server industry with approximately 90% share. Intel has been one of the poster children for the death of the PC negative sentiment and the belief that as the world goes increasingly mobile that Intel's core PC market would bleed a slow death. In addition, the belief was or perhaps still is that Intel can only make performance-heavy chips while mobile products require power-efficient chips, and that therefore Intel's mobile ventures would fail.

This negative sentiment sounded like a potential opportunity to us. We did a lot of research and became comfortable with our thesis that Intel's market price at the time of our purchase was supported by the profitability of their core businesses, and that the company had various other growth opportunities that were not priced in and had a good chance of working out.

Before diving into our thesis, let me quickly highlight that Intel reports their earnings into four real segments. The first one is PC client, which includes chips for desktops and laptops. The second one is data center, which has the server chips. The third one is the software and services segment, which holds Intel's acquisition of McAfee. And the fourth segment is the other Intel architecture segment that includes Intel's tablet and mobile phone ventures.

Now jumping into our thesis, currently only the PC client and data center segments make money, and their combined earnings per share is greater than $2. We see these two segments as Intel's core businesses. If you take out the excess cash that Intel holds on their balance sheet, at Intel's current share price you can back into a p/e multiple on the core business of approximately nine to 10 times. We believe the core business is worth more than that. We acknowledge the headwinds to the PC segment, but growing corporate PC profits, innovation in the laptop space and a server business that is growing double digits should lead to longer-term profitable growth in the core business.

The server business is the backbone of the mobile revolution, and therefore we anticipate continued growth here well into the future. Regardless, we believe our investment is supported by the core business. This leaves the rest as potential upside and the opportunities here are not trivial...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Rates

View Comments (0)