After a torrid run higher during the last few months of 2017, Intel Corporation (NASDAQ:INTC) stock has struggled in the early parts of 2018. INTC stock is down 7% so far this year, while the S&P 500 has rallied nearly 3%.

The big culprit for the share price under-performance has been a big security issue with Intel chips. Certain Intel chips were highlighted as being susceptible to some security exploits. Investors freaked out on the news and with good reason.

In today’s world of big digital data and multiple high profile hacks, cyber-security is hugely important. Consequently, lack of cyber-security is a big issue, so when Intel was reported to have a security problem, investors thought that meant Intel customers would run for the doors and switch to Advanced Micro Devices, Inc. (NASDAQ:AMD).

The INTC stock prices say it all. While Intel stock is down 7% in 2018, AMD stock is up about 17%.

But in the aftermath of this security flaw discovery, it looks like the impact it will have on the broad chip industry is minimal at best. That makes Intel stock, which has always sported an attractive valuation, look compelling on this drop.

Security Issues Seem to Be in the Rear View Mirror

When the security issues were first discovered, Intel announced that they would develop and rapidly issue updates for the affected systems. Bears freaked out that this update would cause a massive slowdown in performance, upset customers, and cause churn.

That hasn’t happened. All of Intel’s big customers have come forward and reported little to no performance slowdown as a result of the updates.

Apple Inc. (NASDAQ:AAPL) said that the updates “resulted in no measurable reduction” in performance.

Microsoft Corporation (NASDAQ:MSFT) said that the “majority of Azure customers should not see a noticeable performance impact with this update.”

Amazon.com, Inc. (NASDAQ:AMZN) said that they “have not observed meaningful performance impact.” Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) reported that they have seen “negligible impact on performance.”

Moreover, by the end of next week, more than 90% of processors products introduced within the past five years will have the updates installed and be immune to the aforementioned security exploits.

Big picture: there was a security flaw. Intel issued updates to address the flaw. All those updates were issued rapidly (roughly two weeks). And there was no performance slowdown among major customers as a result of the updates.

Because the issue was resolved quickly and without performance hiccups, I don’t see where the churn will come from. Without churn, there won’t be a financial impact. Without a financial impact, the recent sell-off in Intel stock looks like a “buy the dip” opportunity.

INTC Stock Is Fundamentally Undervalued

I initially thought this was a 10% earnings growth company (the Street is at 9% long-term).

Although I still believe, lets say for argument’s sake that recent security issues do have some financial impact as a few customers migrate from Intel to AMD. Even with that customer churn, growth will still remain big thanks to the company’s exposure to secular growth markets like big data, artificial intelligence, autonomous driving, and hyper-scale data centers.

Lets consequently slash the earnings growth estimate to around 8% (below the Street). The S&P 500 is trading at an 85% premium to growth prospects (20.9-times this year’s earnings for 11.3% multi-year growth prospects).

Apply that same premium to INTC stock. You get a fair earnings multiple of about 15. A 15-times multiples on this year’s $3.24 earnings estimate yields a fair value of just under $50.

Thus, even if security issues do have some impact on the numbers, INTC stock is still a buy here due to a compelling valuation in a big growth market. If there is no financial impact, there is a case for INTC stock to head towards $60 (85% premium on 10% growth implies earnings multiple of 18.5, which on $3.24 earnings estimates, gets you to a $60 stock).

Bottom Line on INTC Stock

I think this is a buy the dip opportunity in an attractively valued name that has good growth prospects over the next several years.

As of this writing, Luke Lango was long INTC, GOOG, and AMZN.