Ahead of the CES show, held earlier this month, many investors accumulated shares of Intel (NASDAQ:INTC). INTC stock bottomed in November 2021 and has since trended higher. Though the stock briefly rallied on Intel’s Dec. 7 announcement that it would spin off its Mobileye unit, the chip giant is still a rebound play.
Intel lost market share to Advanced Micro Devices (NASDAQ:AMD) in the last few years, as AMD redesigned its computer chips, becoming the preferred CPU for high-end gaming systems.
Recently, Intel has started to give investors hope. It released another CPU late last year, announced the planned Mobileye spinoff, and committed to soon launch a new graphics card.
INTC Stock Has Deep Value
Intel trades at a price-earnings ratio of around ten times, The stock’s dividend yield is 2.5%. AMD, conversely, has a P/E ratio of 42.5, making the stock vulnerable to a correction. The Federal Reserve’s multiple, upcoming, expected rate hikes are pressuring richly valued stocks. Fortunately, INTC stock is cheap, as investors do not expect the company to grow a great deal in 2022.
Meanwhile, technology sites are praising Intel’s new Alder Lake chip. With this chip, Intel created a good balance between high computing power and low power usage. Most importantly, Alder Lake is priced competitively with AMD’s chips. For mainstream and budget users, Intel is a better choice than AMD.
At this year’s CES show, Intel said that Alder Lake would power over 100 laptop models. Expect tech websites to give those computers positive reviews, leading to strong chip sales for Intel.
Thanks to Intel’s strong supply chain, computer makers will have an abundance of its chips available. As a result, Intel’s revenues should climb next quarter.
The Spin Off of Mobileye
In a deal that will unlock value for its shareholders, Intel said that it would take its Mobileye subsidiary public in mid-2022. Furthermore, Intel will still own a majority stake in Mobileye, which is likely to become a big player in the autonomous-vehicle market. And by tapping the stock market, Mobileye will get more funds to support its growth.
Intel’s Discrete Graphics Product
Arc is the graphics card brand that Intel is counting on to disrupt the GPU market, which is currently dominated by Nvidia (NASDAQ:NVDA) and AMD . Thanks to the chip shortage and strong demand from cryptocurrency miners, neither Nvidia nor AMD is updating its GPUs.
Gamers currently need to wait many months to receive the out-of-stock AMD and Nvidia GPUs they order. Alternatively, consumers may shop for a card at one of Best Buy’s (NYSE:BBY) stores. Due to the low inventories of the GPUs made by AMD and Nvidia, the two firms are opening an opportunity for Intel to gain market share in the sector.
Intel said that it would launch its graphics card in Q2. Given the powerful demand for GPUs, Intel can charge relatively high prices for Arc.
Fair Value
The average price target of the 24 analysts covering INTC stock is $55.29, according to Tipranks. Analysts have little conviction in Intel’s growth prospects, as there are more analysts with “hold” ratings than those with “buy” ratings on the shares.
Analysts may not understand the magnitude of the positive impact that Arc will have on Intel’s revenue. The graphics gaming card sector is quite large and can easily support a third company, in addition to AMD and Nvidia.
By the time analysts realize the extent to which Arc will lift Intel’s financial results, their estimate adjustments and upgrades will be late. Consequently, the stock could rally sharply in the coming months before INTC stock gets its first big upgrade.
Consumers who have shopped for a computer recently will notice that Intel has a good pricing strategy for its CPUs. Specifically, in order to attract mainstream users, Intel competitively prices these chips. Some of them have a price-performance ratio that is on par with or better than the equivalent AMD chip.
For now, AMD will primarily serve the high-end market. While AMD prepares its next-generation products, Intel may gain market share.
The table above indicates that INTC stock is in deep- value territory and is a quality name with high returns on investment. The company, however, scores lower when it comes to growth metrics. That will change after it launches its graphic card this year.
Intel is a deep-value semiconductor stock. Investors should consider buying its shares before they rise further.
On the date of publication, Chris Lau 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.
