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Perspective On Intel

|Includes: Intel Corporation (INTC)


Will it recover or is there another drop in the near future?

Should we worry about the CEO?

Long term play?

Intel. Definitely gave me a scare today and yesterday, however I see it as a decent play. Full disclosure I'm currently long on the stock and almost had a heart attack seeing it drop to $42.87, however I truly believe the stock is not in as much trouble as some people think, which has been reflected in the rebound for the day. 

I'm not exactly sure if the stock itself is overvalued, P/E is still relatively low compared to the industry and broader market coming in at 15.53, and EPS has shown a steady increase with revenues increasing dramatically YOY, so I would say it's still valued rather fairly. In terms of recovering from its most recent dip, I definitely see it retesting $47.00 soon and with earnings coming in the end of January, I do expect them to either meet or exceed expectations, however I'm honestly probably going to profit take if it gets anywhere near $47.00 before earnings. 

In terms of concerns for the CEO, I'm not concerned about Brian Krzanich and potential insider trading violations. It might sound like an elementary explanation but the guy is filthy rich and has no reason to have sold off half his shares based off insider trading. Not to say there is not excessive greed in the world, cough cough Bernie Madoff, however Brian doesn't seem like the man who is looking to win on a $1 per share gain. Rather, the stock was at nearly all time highs and he wanted to sell off shares to take profits, we all do it he was just unfortunate enough to time it just prior to this news being leaked. 

In terms of the chip issue, I fully believe that this is not just an Intel problem but an AMD, Micron, etc... problem. I believe this because I didn't hear any other CEO chime in and squash what Brian Krzanich had said regarding it being issues of many other producers. With that being said, there are a lot of diligent people working on finding a viable solution and I personally have faith that a bunch of techies will fix the problem. Furthermore, I believe that the patch will have very little affect on the computer processing speeds as stated on many IB reports. 

Lets just say that the worst happens and it ends up being a harder issue to fix and Mr. Krzanich was caught for insider trading or has at least been branded as an unscrupulous CEO, what's the worst case scenario? One word for you, Equifax.... The company dropped from the 140's to 96 and now in the low 120's however if you dollar cost average both the high and the low you'd be slightly profiting already and frankly that was a much bigger scandal compared to this issue with the chips. I think people are used to not trusting technology at this point and fully understand that none of our information is 100% safe, so even a sub-par fix at this point will be good enough in the short run before finding a legitimate solution. Something that can be announced on the news as being "fixed" will allow the stock to tick up to its previous highs. 

In terms of a long term play, I think Intel has a lot of potential for really 2 reasons. The first reason that many people may not know is that Intel rejected an offer from Apple to produce the microchips for the iPhone back in 2006-2007, and I think they're still kicking their-selves for it. With that in the back of my mind, I know that the next big thing that comes into play in the microprocessor world they're going to be on it like bees on honey. What may that next big thing be? Maybe working with more car manufacturers to help with processors for fully autonomous cars, work more with AI, or help with Augmented Reality. All I know is, they're not going to miss the boat again which gives me hope not only on a quick play but long term play as well. 

Disclosure: I am/we are long INTC.