Intel Corporation (INTC) Stock a Big Buy Ahead of Earnings

Intel Corporation (NASDAQ:INTC) seemed left behind as other semiconductor stocks soared. As recently as September, INTC stock prices hadn’t moved in three years.

Intel Corporation (NASDAQ:INTC)
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But Intel stock has since rallied, gaining 18% just since August; INTC stock now trades at a 10-year high.

Even with those gains, however, Intel still seems like a disappointment compared to rivals in the space. Nvidia Corporation (NASDAQ:NVDA) has risen a stunning 1,500% in the past five years. Chief CPU competitor Advanced Micro Devices, Inc. (NASDAQ:AMD) went from under $2 to over $15 before a recent pullback. Micron Technology, Inc. (NASDAQ:MU) has been volatile, but still has gained 700% in the past five years.

In that context, the 90% rise in INTC stock over the past five years seems downright pedestrian. But even with the recent gains, there’s reason to see further upside for the Intel share price. Improved products from rivals has forced Intel to raise its own game. Intel has a major opportunity in automotive, a key source of optimism toward NVDA. And an extremely reasonable valuation leaves room for Intel’s multiple to expand. All told, Intel looks like a buy ahead of Thursday’s earnings report – and beyond.

Why Intel Stock Has Upside

The argument against Intel largely has stemmed from the fact that it still relies on PC sales, which have been stagnant for years. That’s still a concern – but Intel also is starting to flex its muscles in other areas.

In automotive, the acquisition of Mobileye makes Intel a legitimate player in the self-driving car market. Components developed by the legacy business reportedly have displaced Nvidia at Tesla Inc (NASDAQ:TSLA) as well. Intel also is making waves in artificial intelligence, as Luke Lango detailed earlier this month.

And Intel isn’t giving up on its legacy business, either. Both Nvidia and AMD are challenging the company’s near-monopoly in data center; Intel has responded with its new Xeon chips, launched in July. Cannon Lake, Intel’s answer to AMD’s Ryzen line in CPUs, won’t be ready until next year, but Intel promises a strong answer to its strong rival. And the new i7-8700K is Intel’s “best gaming processor ever.”

Competition is tougher, and long-term prospects for the PC market remain in question. But investors writing off Intel, and Intel stock, do so at their peril.

INTC Stock Still Is Cheap

Meanwhile, even with the recent gains, Intel is pricing in little in the way of growth. The stock still trades at under 14x 2017 EPS guidance of $3. Intel’s dividend yields a nice 2.7%, adding income as well.

And the stock looks attractive ahead of earnings, with investors clearly betting on a beat. As Joseph Hargett pointed out on Monday, the options market is pricing in a nearly 4% post-earnings gain on Thursday. Expectations might seem like they’re rising, but Street consensus still projects flat earnings year-over-year, giving Intel a low bar to clear and leaving the potential for a nice post-earnings gain in INTC stock.

Certainly, Intel is highly unlikely to replicate the multi-bagger gains seen at AMD, NVDA, and MU over the past few years. After all, it’s a company worth nearly $200 billion, with over $60 billion in revenue. With chip stocks, and large-cap tech stocks, all up big so far in 2017, INTC stock still feels like a laggard. But Intel stock has a very good chance of catching up, starting on Thursday.

As of this writing, Vince Martin has no positions in any securities mentioned.

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