INTC – Intel Stock Is Your Best Buy This Summer

by Jeff Reeves | May 8, 2014 12:45 pm

INTC – Intel Stock Is Your Best Buy This Summer

Intel (INTC[1]) is hardly the sexiest name among tech stocks. There’s all the talk about a post-PC age and a lack of mobile prowess, even prompting some pundits[2] to compare INTC to fallen smartphone icon BlackBerry (BBRY[3]) as a once-dominant tech name now doomed to fail.

intel INTC   Intel Stock Is Your Best Buy This Summer[4]So if you’ve believing all the headlines hating on Intel stock, you might be surprised to learn that INTC is up about 10% in the past three months.

And you might be even more surprised to learn that Wall Street thinks this is only the beginning of the upside for INTC stock in the months ahead.

Intel earnings[5] beat expectations in the first three months of the year, thanks in part to growth in its data-center business and (surprise!) corporate PC sales. So much for the rise of mobile and the death of the desktop.

Furthermore, a strong outlook for continued corporate sales just resulted in a number of analyst upgrades for Intel. These include an upgrade to “buy” at Deutsche Bank with a $30 target and bullish calls of $32 and $35, respectively, from Pacific Crest and Jefferies.

Admittedly, revenue has been stagnant since 2011, and growth sure isn’t easy for Intel. But in 2014, investors are clearly going “risk off” in tech as they have punished momentum names from Amazon (AMZN[6]) to Twitter (TWTR[7]) to (surprise again!) Intel rival ARM Holdings (ARMH[8]) that makes mobile chips for the likes of Apple (AAPL[9]).

These stocks are off by roughly 20% or more year-to-date, while Intel is in the black.

Regarding the short term, I agree with analysts that the poor performance of enterprise tech over the past few years will start to change as businesses begin to invest again. And if that trend proves true, we could see Intel continue to see growth in its data center and PC business in the short term.

And on INTC over the long term, Intel continues to make progress on mobile chip sets and adapting its business to a new environment. Beyond the strategy, there’s the juicy dividend and a strong history of increases. Intel’s dividends have advanced 450% in the past 10 years, from 4 cents quarterly to 22 cents, but still are comfortably below half of projected earnings.

And with $30 billion in cash and investments on the books, and more than $20 billion in annual operating cash flow, there’s a reasonable expectation of continued dividend growth going forward.

Bottom Line

Intel stock certainly isn’t the sexiest name in tech. But don’t think that means it’s incapable of modest growth in 2014.

And given that sentiment on high-growth-but-low-profit tech stocks has crumbled, taking shelter in a high dividend stock like INTC could be a good way to get a bit defensive but still play the upside in tech across the rest of the year.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

Endnotes:
  1. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  2. some pundits: http://qz.com/16445/seven-reasons-intel-could-be-the-next-rim-and-why-the-company-is-in-a-fight-for-its-life/
  3. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  4. [Image]: http://investorplace.com/wp-content/uploads/2012/12/intel.gif
  5. Intel earnings: http://newsroom.intel.com/community/intel_newsroom/blog/2014/04/15/intel-reports-first-quarter-revenue-of-128-billion-operating-income-of-25-billion-up-1-percent-year-over-year
  6. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  7. TWTR: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWTR
  8. ARMH: http://studio-5.financialcontent.com/investplace/quote?Symbol=ARMH
  9. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL

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