While semiconductor stocks have been in the rally mode, there have been some notable players that have been left out of the party. One of them is Intel Corporation (NASDAQ:INTC). In fact, for the year so far, INTC stock is off more than 4%.
Unfortunately, this is certainly not an aberration. Since mid-2014, Intel stock has been stuck in a price range of about $32 to $35.
So then, perhaps there is an opportunity here? Maybe INTC stock is a good value play?
All in all, it’s tough to say. But on Thursday, we’ll get a better sense of things. This is when Intel earnings will highlight the company’s second-quarter results.
The main advantage: the bar has been set fairly low for Intel stock, so it’s a good bet we’ll see a beat.
What to Expect From Intel Earnings
The consensus is for earnings to come to 68 cents a share and for revenues to hit $14.41 billion. By comparison, last year INTC reported the top-line at $13.53 billion and earnings of 59 cents a share. During the time, the company also announced a major restructuring, with the goal of laying off 12,000 jobs or about 11% of the global workforce.
As for the upcoming Intel earnings report, what will Wall Street focus on?
Here are some key topics:
- Next-Generation Technologies: How is the company progressing in categories like AI (Artificial Intelligence) and the Internet-of-Things (IoT).
- Acquisitions: Investors will want to know how the integration is going with the Altera deal. What’s more, there will be lots of attention on the pending $15.3 billion acquisition of Mobileye NV (NYSE:MBLY). The deal will give INTC a nice footprint in the autonomous vehicle market, which is expected to reach a whopping $70 billion by 2030.
- Wearables: It appears that INTC has abandoned its efforts in this market. The industry has become intensely competitive, especially given Apple Inc.’s (NASDAQ:AAPL) success with its Watch platform.
Although, when it comes to INTC stock, the most pressing topic is likely to be the competitive market for the data center. And it is getting very intense. Operators like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nvidia Corporation (NASDAQ:NVDA) have invested substantial amounts in their data center technologies, and both companies are pioneers in the Graphics Processing Unit (GPU) category. This technology has proven quite effective with AI because these chips can process huge amounts at low costs but there is also much better processing of images.
However, this does not to imply that INTC will see a rapid disruption of its business. The fact is that the company has major advantages, such as global scale, a large base of trusted customers and a great team of talented engineers.
Bottom Line on INTC Stock
But such factors will still probably not be enough to avoid material penetration of the revenue base. After all, Intel has nearly most of the data center market. In other words, the company is in a terrible situation where it can only lose share — not gain it.
Besides, there are many cloud customers — like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) — that want an alternative to INTC, which should allow for better pricing and terms.
INTC stock is trading at a fair valuation, with the forward price-to-earnings ratio at only 12X. The dividend is also at an attractive 3.14%.
However, it seems as if there will be continued headwinds for Intel stock — at least for the next few quarters, as NVDA and AMD ramp their efforts. So for investors, it’s probably best to hold off.
Tom Taulli runs the InvestorPlace blog IPO Playbook and operates PathwayTax.com, which provides year-round tax services. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.