Buy the Intel Corporation (INTC) Stock Transformation While It’s Cheap

Intel Corporation (NASDAQ:INTC) stock has gained nearly 18% over the last 12 months but is in the red year-to-date despite general strength for the market and tech sector. That’s the bad news. The good news? It has made INTC a stock you can’t afford to pass up.

Buy the Intel Corporation (INTC) Stock Transformation While It’s Cheap

The company’s most recent earnings report, which came out in April, is one reason shares have been struggling. Intel, which is primarily a chip company, beat Wall Street’s earnings-per-share consensus by a penny but posted a disappointing top line. Revenue just missed the expected mark, while the company’s data center segment also came in below forecast. That worried investors the most, as the data center segment is one of the company’s touted solutions to a rapidly shrinking PC market.

The data center segment is only one growth market for Intel, though — and the first quarter is always slow for it. The Internet of Things is the other hot play, and I’m a believer in its prospects. The transformation from PC king to Internet of Things player is going to be rocky (as it has been of late), but savvy investors will see the value and act early.

INTC Stock’s New Focus

Intel’s Internet of Things focus of late has been self-driving cars — an industry that’s requiring a bridge to be built between traditional automakers and cutting-edge tech companies. While a car is obvious the baseline technology, massive computing power is needed to make one autonomous and safe.

INTC stock is hoping its technology and name brand will be enough to carve out a substantial piece of what’s expected to be a rapidly expanding pie.

To that end, Intel bought Mobileye NV (NYSE:MBLY), an Israeli company that makes sensors and chips for autonomous vehicles, in March. It also had previously partnered with BMW to build a fully self-driving car by 2021 — a goal that seems even more likely since Delphi Automotive PLC (NYSE:DLPH) was added to the alliance last week.

For those not familiar, auto supplier Delphi is famous for creating a self-driving car that drove 3,400 miles across the country in 2015.

Once again, the transformation to being a chip company with a strong self-driving car segment isn’t always going to be smooth or consistent. Autonomous vehicles have been touted as the next big thing since the early 1900s, but we didn’t have the processing power necessary until now. And that processing power is going to come from companies like Intel. As the Mobileye acquisition shows, the many startups also aiming to nibble on this pie can easily be munched up by a giant like Intel, which has deep pockets and a good track record.

Plus, from an investment point, you’re buying a cheap stock with a juicy dividend and unrealized long-term profits. That’s quite a combination. At current levels, Intel is trading for just 12 times forward earnings and is yielding over 3%. While I don’t love INTC stock’s debt levels, I do love its return on equity and operating margins. And I believe the long-term growth estimate of 8% could be modest as all the self-driving car puzzle pieces come together.

The Intel transformation is in its early stages, but it’s real. Investors should dive in before the price reflects the true potential.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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