Sorry to steal from the Manic Maestro of Mad Money, but in Intel's (INTC) case the larceny is warranted. They ("AKA, the market) really do not give the company due credit. It is valued like its entire future is tied to the PC market which has been substantially impacted by the migration of computing power to smartphones and tablets where the only winners evidently will be the Apples (AAPL) and ARM Holdings (ARMH) of the world. However, Intel is not Dell (DELL) whose fortunes are rapidly fading along with its former dominance in the PC market. Intel has numerous strengths and is significantly undervalued at these levels.
Ignored factoids around Intel:
- Data center sales have doubled over the last decade and now account for 20% of Intel's total revenue.
- PC revenues are still expected to grow in the single digits in 2012, powered by sales to emerging markets like Brazil and China.
- Over the next few months Intel will roll out its low power Atom line built for mobile with myriad markets worldwide.
- Intel's mobile business is expected to grow 37% to $5.5B in FY2013 as smartphone sales start to kick in.
- Intel has some 1200 engineers working on Android-related projects in conjunction with Google (GOOG) which has a multiyear agreement to have its Motorola Mobility (MMI) subsidiary produce handsets and tablets with Intel's Atom chip.
- Ultrabook sales should kick into overdrive once Windows 8 by Microsoft (MSFT) rolls outs in the fourth quarter.
- With Fabrication plants "Fabs" costing upwards of $5B apiece, Intel is one of the few companies with the expertise and financial strength to be in vanguard of new chip production.
"Intel Corporation designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan." (Business description from Yahoo Finance)
4 additional reasons Intel provides deep value at just over $25 a share:
- Intel has an A+ rated balance sheet, yields 3.3% and has raised its dividend payout at better than a 13% annual pace over the past five years.
- As stated previously, the market is underpricing INTC's growth prospects. It has a five year projected PEG of under 1 (.87) and analysts expect 6% to 8% sales growth for both FY2012 and FY2013
- The stock is selling near the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
- Intel has beat earnings estimates for six straight quarters and has a forward PE of around 9.5, a significant discount to its five year average (15.4).