Intel Q1 Earnings: Don’t Expect Much More From INTC Stock

Intel Corporation (NASDAQ:INTC) is up 3% in Tuesday’s after-hours trading following its first-quarter earnings report … and that might be just about all the gains we’ll see from INTC in the near future.

Intel stock INTCIntel earnings came to 41 cents per share, on target with Wall Street expectations and up 3 cents per share from Q1 2014. Meanwhile, revenues came in at $12.78 billion, fractionally better than the year-ago figure.

INTC’s results came just more than a month after Intel slashed its revenue outlook by about $1 billion, and guidance for the second quarter was conservative as well. For Q2, Intel is projecting revenues of $13.2 billion (plus or minus $500 million), and gross margins of 62%. Wall Street was looking just a bit higher, at $13.45 billion and gross margins of 61%.

One bright spot, though, was the full-year forecast, in which INTC sees revenues of $55.9 billion versus an analyst consensus of $55.69 billion.

Despite some pretty mediocre-sounding numbers, there are a couple of nice drivers ahead for INTC. Markets like data centers and the Internet of Things — where we can all be connected to our toasters — should continue to increase demand for processors and memory chips. Consider that in Q1, the revenues for data centers jumped by 19% to $3.7 billion, and the IoT segment booked an 11% gain to $533 million.

But at the end of the day, Intel earnings are still heavily reliant on PC demand, which continues to be lethargic. INTC also missed out big on the early part of the mobile revolution, which is really where the big source of growth remains for chipmakers.

Intel has made inroads int his area, but it’s tough to get a sense of exactly where INTC in the mobile business. That’s because last year, Intel combined its PC unit with its mobile chip division, which it now calls the “Client Computing Group.”

Overall, though, things aren’t going very well — INTC reported an 8% decline in group revenues to $7.4 billion.

Expect Intel to look to dealmaking to rev things up. Late in March, Intel reportedly was in talks to buy out Altera Corporation (NASDAQ:ALTR), which is a top player in the market for programmable chips. The deal likely would’ve helped INTC maintain its heft in server chips.

However, negotiations have stalled for the time being, but Intel’s needs haven’t gone anywhere … so expect INTC to head back to the boardroom for some more M&A brainstorming.

Bottom Line

While Intel has a few positives to speak of, there aren’t enough catalysts to really paint an encouraging picture for anyone expecting true growth out of INTC stock.

There are some value prospects — Intel’s forward price-to-earnings ratio of 14 is lower than others in the space, and Intel does offer one of the more generous dividends in the tech space at 3%.

But in terms of strong capital gains? Investors can do better elsewhere.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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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