If the recent resiliency of Intel Corporation (NASDAQ:INTC) shares has been annoyingly surprising, take the hint the market’s giving you. INTC stock has been and continues to be a buy, even when it seems like it shouldn’t be.
Yes, among the multiple reasons Intel should (theoretically, anyway) be fighting an uphill battle is the fallout from the Spectre and Meltdown computer vulnerabilities that were discovered just a few weeks back. Though the fix more or less works, that fix has also noticeably slowed some computers down.
As of the latest tally, 32 class action lawsuits are being levied against the company. That’s not the only headwind blowing against the INTC stock price right now, however.
As much as Intel is still the most recognizable name in the chip business, it’s also still best suited as a maker of PC processors in a world where mobile processors made by NVIDIA Corporation (NASDAQ:NVDA) or QUALCOMM, Inc. (NASDAQ:QCOM) are the core opportunity.
Meanwhile, NVIDIA continues to dominate the graphical processor market Intel just recently entered, against a backdrop of recently-unveiled GPUs from Advanced Micro Devices, Inc. (NASDAQ:AMD) that are impressive in their own right.
Nevertheless, a couple of pros still see Intel stock as the top pick in the semiconductor space. And their arguments have a fair amount of supporting evidence.
Still a Lot to Like
The obvious challenges not withstanding, INTC stock was still on the receiving end of not one but two recently-delivered analyst accolades.
Gradient Investments portfolio manager Mike Binger supplied one of them on Friday, noting:
“This is an easy name to own in the space, they just had a really good quarter, a revenue and [earnings-per-share] beat, and they raised the dividend. The Internet of Things, the Altaira acquisition, is going well. Memory and data center chips, it’s all working well for them. No longer are they at the whims of the PC cycle they’re seeing. So own Intel, it’s going to work out fine.”
He’s not wrong.
Although still a PC-centric business, Intel stock has become more of a smartphone play than many investors realize. The buzz is that Apple Inc. (NASDAQ:AAPL) will soon be dropping QUALCOMM as one of the co-suppliers of modems for its iPhones and lean entirely on Intel as a provider.
In the meantime, though Intel’s chips have been impressive, the company’s been conspicuously absent from the 10-nanometer race, continuing to make chips using adequate-but-aging 14-nanometer technologies.
Large-scale production of its 10-nanometer processors is scheduled to begin in earnest later this year, raising the bar in terms of what a CPU is capable of.
Something else that Binger didn’t say: Intel is deeper into autonomous cars than most investors realized. It’s been working with Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) on self-driving vehicles for years now, and it’s not an exclusive relationship. The autonomous vehicle market is expected to be worth $127 billion by 2027.
The other bullish argument came from Fort Pitt Capital senior portfolio manager Kim Forrest, who opined:
“Intel is an all-around well-run company that is making steady gains in the newer areas of drones and autonomous driving. The company’s most recent quarter shows that the competition is not gaining on the high-margin server chips.”
Again, like Binger’s stance, Forrest’s viewpoint is tough to (figuratively) buy into based on little more than the headlines. A closer look, though, does indeed reveal that Intel continues to hold its own.
Case in point: The company’s new Xeon D processors give it an edge on… the “edge”, of the Internet of Things. By offloading a bunch of the actual computing work to the remote device rather than sending data to a server to let it crunch the numbers, bandwidth and time is saved.
It’s just one example of how Intel is adapting itself to meet the needs of the modern market.
Bottom Line for INTC Stock
Don’t misread the message. Intel has plenty of work in front of it, not the least of which is restoring trust with consumers and corporations following Spectre and Meltdown.
There’s also the not-so-small matter of QCOM aiming to enter the server and PC processor market, where Intel is still the king. Intel’s latest Xeon line and 10-nanometer chips will help defend its turf, but it won’t be an easy fight.
Nevertheless, Forrest and Binger both have valid points. For all the company’s flaws, Intel stock remains one of the stronger options in the semiconductor market, largely underappreciated for everything it’s still doing well.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
