Intel (NASDAQ:INTC) stock tends to move significantly over longer time periods. I believe there’s a big opportunity in purchasing Intel’s shares, but it probably isn’t imperative that investors rush out and do so today.
The once-dominant chipmaker is currently facing multiple, formidable foes with considerable power, but it does seem to be headed in the right direction again. Also, it’s certainly inexpensive now.
Intel will be worth more in the coming years but the company’s size and task it faces mean it won’t rise overnight. Still, if you’re willing to be patient, this turnaround is one worth betting on.
Intel’s July 26 earnings left investors feeling indifferent, which was a bit of a surprise. After all, the company ended up exceeding expectations on multiple fronts. It exceeded Q2 guidance for revenue, earnings per share and gross margin.
Further, Intel’s PC and MobilEye businesses recorded record revenue in the quarter. These successes led the company to bullishly raise full-year guidance for both revenue and EPS by both GAAP and non-GAAP measurements.
Yet, when the news was released, INTC stock traded just as it might on any normal day. Investor indifference could have been a result of simply wanting more. Revenues, while exceeding expectations by $700 million, were only up 2%.
Investors are struggling to see a clear investment thesis for semiconductor manufacturers as the current shortage introduces a host of unknowns, increasing volatility.
Intel CEO Pat Gelsinger was upbeat, noting that his firm’s scale and momentum should make it a winner in the upcoming decade. He sees sustained growth for that time horizon as the digitization of everything necessitates greater chip volume production.
A Closer Look at INTC Stock
It’s no secret that Taiwan Semiconductor Manufacturing (NYSE:TSM) is a massively important force in chip manufacturing. Taiwan, along with South Korea and Samsung dominate the foundry space, leaving U.S. manufacturers beholden to those firms in a geopolitical tug-of-war.
Firms like Intel are scrambling to bring foundries stateside and abroad under their control precisely because of that geopolitical risk.
Rumors of a potential acquisition surfaced in July between Intel and GlobalFoundries. However, GlobalFoundries looks to be going public as the company recently filed its intention to proceed with an IPO.
Had the deal materialized, Intel would have increased its foundry footprint, moving more toward a Samsung and Taiwan Semiconductor business model.
That acquisition would have carried some irony as GlobalFoundries was created as a result of Advanced Micro Devices (NASDAQ:AMD) spinning off its production capabilities.
While that deal looks to be dead in the water, Intel’s intent is clear: It is headed toward a future in which it becomes a hybrid supplier rather than an outright competitor in semiconductors.
Undoubtedly, a GlobalFoundries acquisition would have been a boon to INTC stock, but the company will continue that search.
The process is a long one, and Intel is already advancing its fabrication efforts in the U.S.
Back in March Intel announced that it was investing $20 billion into new fabrication facilities at the company’s Arizona campus.
That means that Intel’s internal capabilities will be getting a boost. The company will be more able to meet its own needs in the coming years.
It also signals a return of Intel to the business of making semiconductors designed by other companies.
It’s clear that Intel believes its future will include renewed efforts toward establishing a name for itself as a foundry. Back in 2013-2014 Intel attempted and failed to begin a foundry. This time the company is making its foundry a stand-alone effort to be run by its senior vice president, Randhir Thakur.
The Bottom Line
Intel is turning around after a tumultuous few years. If its foundry plans succeed this time, money invested now should be worth much more in a few years. That’s the investment thesis bulls should understand if they are to establish a position in Intel now.
It won’t happen overnight, but once the signs that the strategy is working appear, gains will be had quickly.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.