Since late June, Intel Corporation (NASDAQ:INTC) has staged an nice rally, up about 17%. The company has been showing more momentum in its earnings and is also getting bolder with its technology bets.
So can expect even more gains from INTC stock? Well, I think so. It is encouraging that CEO Brian Krzanich is rethinking the vision of the company. Earlier in the year, he noted that the focus would be to make, “Intel the driving force of the data revolution across technologies and industries.”
True, this may seem kind like fluff. But then again, one of the issues with INTC stock is that the company has often lacked a core focus. Because of this, it has missed out on critical growth opportunities like mobile. Oh, and it has also meant that the company has made bad strategic investments, such as the move into cybersecurity.
The bottom line is that INTC stock has been a long-term poor performer. During the past decade, the shares have gained only 55%.
OK, so what are some of the positive signs of the new strategy? First of all, there is the $15.3 billion acquisition Mobileye, which should be a long-term driver for INTC stock.
Mobileye is a pioneer in auto technology, with a focus on vision systems for driver safety. Note that more than 15 million vehicles have the chips. But Mobileye has also leveraged its technologies into developing systems for autonomous driving, such as with sensing, mapping and driving policy. Consider that BMW plans to use this for vehicles that are expected to rollout in 2021.
No doubt, as seen with the headlines, the market for autonomous vehicles is red-hot as all the many global automakers scramble to not miss out on the megatrend. According to INTC’s own projections, the market could be over $70 billion by 2030.
But there are other drivers for INTC stock:
- 5G: The company has a strong presence in this category, which is likely to see growth during the next few years as carriers upgrade their mobile networks. The company currently has five trials with global operators as well as 15 in the pipeline.
- Internet of Things (IoT): Intel has gotten quite a bit of traction with verticals like retail, video, industrial and transportation. During the latest quarter, the overall segment saw revenues jump by 26%.
- Memory: This business has been on fire, up 58% during the latest quarter. Then again, Intel has been pushing innovation, as seen with the recent launch of 64-lawyer 3D NAND SSDs.
- FPGA: Granted, the business has seen recent weakness. But this appears to be temporary. After all, FPGA systems have proven to be effective technology for cloud networks.
Bottom Line on Intel Stock
Yet Intel has been taking swift actions to bolster its solutions, as seen with the launch of the 8th-gen Intel Core CPUs. Let’s face it, the company has tremendous resources, engineering talent and global distribution. As InvestorPlace.com’s Brad Moon as written: “The release of the new desktop CPUs could be what’s needed to push INTC to new highs for 2017.”
Besides, the valuation on Intel stock is reasonable. Consider that the forward price-to-earnings ratio is only about 13X. And yes, the dividend is fairly attractive, at 2.8%.
So even with the risks, the company still has a good shot at renewing growth, especially with its healthy businesses in autonomous vehicles, memory, IoT and FPGAs.
Tom Taulli runs the InvestorPlace blog IPO Playbook and is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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