Intel Stock is an Insane Bargain Right Now – Buy INTC ASAP!

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Intel Corporation (INTC) is a stodgy old tech stock that gave the market a bit to be excited about. On Thursday, Intel stock announced that it expected to see revenue growth in the mid single digits and raised its dividend again.

intc stock IntelNormally, single-digit revenue growth is not something to get excited about… even in this lackluster earnings season.

But remember, this is INTC stock we’re talking about, a company whose identity is entwined with the slowly dying PC business. Gartner reported that global PC shipments dropped 7.7% last quarter. And Intel revenues in 2015 are expected to drop by about 1%. So for Intel stock, revenue growth of any kind is cause for celebration.

But there are also other reasons to be optimistic about INTC stock here. Intel expects to up its capital spending budget to $10 billion next year from an estimated $7.3 billion this year. Intel spends a fortune every year in building new facilities and in doing new research and development. So clearly, someone at INTC sees better days ahead.

So, what’s the story with Intel stock? If we’re getting excited about sub-10% revenue growth, then it’s pretty obvious that the best days of growth for INTC stock are long in the past. But frankly, revenue growth has been hard to come by across the entire market this year. This past quarter, S&P 500 revenues fell for the third consecutive quarter… the first time they’ve done that since 2009.

Seen in that light, Intel’s flattish revenues don’t quite look so bad.

 

Buy INTC Stock ASAP

To start, INTC is definitely one of the cheaper large-cap stocks in America outside of the energy sector. It trades for about 14 times next year’s expected earnings. The S&P 500 trades at about 17 times next year’s expected earnings. Looking at the cyclically-adjusted price/earnings ratio (“CAPE”), we get a similar story. INTC trades at a CAPE of 19.8 vs. 26.4 for the S&P 500.

And Intel stock is a lot more generous on the dividend front than your average S&P 500 stock. At current prices, it yields about 2.8% vs. 2.0% on the S&P 500. But importantly, Intel has been a very aggressive dividend raiser. Over the past 10 years, INTC stock has hiked its dividend at a blistering 16% clip, and that includes a 10-quarter hiatus in which Intel left its dividend unchanged due to increased capital spending. Just last week, Intel announced an 8% dividend hike.

While Intel stock is definitely cheap, it’s dividend is not high enough to warrant running out and buying the stock. We need something else… a catalyst that points to higher growth on the horizon.

And as it would turn out, we have it. While PC chip sales are not growing, Intel is enjoying fantastic growth in its server chip business. As more computing moves off of desktops and out of corporate servers and into the cloud, Amazon.com (AMZN), Alphabet (GOOGL) and others are needing more computer power than ever, and Intel essentially owns the datacenter market.

According to Intel CFO Stacy Smith, INTC could still grow its overall revenues at a decent single-digit clip if the PC market drops by another 10% due to the strength of its server chip sales.

IS INTC the buy of a lifetime? No. But frankly, in an expensive market it doesn’t look half bad.

Charles Lewis Sizemore, CFA, is the chief investment officer of investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/intel-stock-intc-pc-sales/.

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