Chipmaker Intel (NASDAQ:INTC) reported second quarter numbers after the bell on Thursday, July 26, that topped expectations on both the top and bottom lines. Management also raised full-year revenue and earnings guidance. In other words, it was a classic beat-and-raise quarter. Yet, Intel stock dropped sharply in response to those numbers.

Why the discrepancy between strong numbers and weak stock price action? It mostly has to do with concerns related to the company’s hyper-growth data center business.

Data center revenues were up 27% in the quarter, better than last quarter but also just shy of consensus estimates. Moreover, the company appears to behind the 14 nanometer to 10 nanometer shift in the data center market, and that has investors concerned that Intel could cede significant market share to competitors like AMD (NASDAQ:AMD).

Overall, these go-forward data center concerns are weighing on Intel stock.

While these concerns have merit, Intel stock below $50 looks too cheap to ignore. Growth across the whole business remains strong. The narrative is improving. And, the company will launch into the 10 nanometer game when the time right.

Thus, I easily see INTC stock heading towards $52 by the end of the year, and materially higher thereafter. As such, below $50 seems like a good place to buy the dip.

Here’s a deeper look.

Intel’s Quarter Was Very Good

Despite the negative stock price reaction, Intel’s quarter was actually quite good.

Revenues rose 15% year-over-year. That beat expectations. It also represents continuation of a multi-quarter uptrend in revenue growth.

The consistent improvement in top-line growth has been powered by a consistent improvement in data-centric growth. A few quarters back, Intel pivoted from a PC-centric business model to a data-centric business model. The pivot has paid off handsomely. Over the past four quarters, data-centric revenue growth has accelerated from 15% to 26%.

The big driver on the data-centric side of things is the data center business, which had a really good second quarter. Revenues rose 27% year-over-year, also continuing a multi-quarter uptrend in growth (data center revenue growth was 7% four quarters ago).

Profitability continues to soar in this segment due to higher yields. Operating margins rose 11 points year-over-year in the quarter to 49%.

Strong second quarter numbers forced management to hike their full-year revenue and earnings guides. Revenue growth is expected to be 11% this year, powered by 20% data-centric growth, which is impressive considering the tough lap.

This robust growth is expected to drive 3 points of spending leverage, which will more than offset some gross margin compression and drive 1 point of operating margin expansion.

Overall, then, Intel’s quarter was quite good. It featured robust and accelerating revenue growth, healthy margin expansion, and strong earnings growth.

Data Center Concerns Are Overstated

Intel stock is selling off because of go-forward concerns in the data center business. Namely, the company is delaying product of a 10 nanometer chip.

Investors are concerned that as the data center market shifts from the current 14 nanometer standard to 10 nanometer, Intel will consequently be left in the dust and competitors like AMD will gain share.

These concerns have merit. Indeed, in the back-half of 2018, AMD will likely steal market share from Intel due to Intel’s lack of a 10 nanometer product.

But, Intel is delaying 10 nanometer production for a reason, and it isn’t because they want to lose huge chunks of market share to AMD. They are delaying production because they think that their 14 nanometer product is good enough to effectively compete and protect majority market share.

They also believe in waiting to launch 10 nanometer product until yields are at a level to optimally support volume production.

In other words, it isn’t like Intel is behind the curve here. Instead, they are just avoiding a premature launch, and have such a good 14 nanometer product that they don’t need to push 10 nanometer aggressively here and now.

Intel Stock Has Upside From Here

The core Intel growth narrative remains strong. Plus, Intel stock is dirt cheap. That combination implies that Intel has healthy upside from current levels.

I maintain an outlook that growth rates will moderate over the next several years due to law of large numbers, tougher laps, cooled off data center growth and bigger competition. But, revenue growth should remain healthy in the ~5% per year range over the next five years.

That is enough growth to drive slight spending leverage, and should push the operating margin up by a few percentage points over the next several years.

Assuming mid single-digit revenue growth and slight margin expansion, I think Intel can do about $5.30 in earnings per share in 5 years. A historically-average 13X forward multiple on that implies a four-year forward price target of nearly $69. Discounted back by 10% per year, that equates to a year end price target on Intel of $52.

Bottom Line on Intel Stock

Overall, Intel’s quarter was very good. Go-forward data center concerns based of chip production delays have merit, but are over-stated at the current price. I reasonably see this stock rallying towards the low-to-mid $50’s over the next several months, making the recent sell-off look like an opportunity.

As of this writing, Luke Lango was long INTC.