Intel (NASDAQ:INTC), a giant within the $400 billion semiconductor industry, has had a difficult second half in 2018. But as Wall Street gets ready to look beyond the U.S. mid-term elections, long-term investors may consider adding Intel stock to their portfolio.
Here’s why.
Amid the broader market volatility and selloff, especially since mid-October, INTC has been one of the few technology stocks that has shown price strength in recent days. I believe investors realize that the stock offers value and that any bad news that’s specific to the company is already baked into the INTC stock price.
The pain in Intel stock coincided with the sudden resignation of its CEO in June, and Wall Street has not been impressed with how long the process to replace the interim CEO is taking. Rumors suggest that the company will break with tradition and bring in an outsider to lead INTC and that interviews with potential candidates are taking place.
Yet, when the new CEO takes the helm at Intel, the world’s second-largest semiconductor company after Samsung, the new management will find a company that offers fundamental value with robust top-line growth and confidence in increased revenues from its Data Center, Artificial Intelligence (AI) and Internet of Things (IoT) businesses.
On Oct. 25, Intel reported record revenue and earnings increases coupled with positive guidance for the rest of the year. Its data-centric business showed over 20% revenue growth, impressing even the most skeptical analysts. As INTC also managed to decrease expenses, both operating and gross margins increased, countering any potential supply glut worries.
Intel Stock Offers Strong Dividend Yield and Share Buyback
In September, Intel declared a quarterly common stock dividend of 30 cents per share, payable on Dec. 1, 2018, to shareholders of record on Nov. 7, 2018. INTC’s dividend yield is a respectable 2.5%. Only a handful of established technology companies offer investors stable and growing dividends — another important reason why Intel stock belongs to a capital-growth portfolio.
Intel management has also been rewarding investors with share repurchases. As of the end of September 2018, Intel has $4.7 billion remaining on its aggressive stock buyback program, which initially started in 2005. Although we do not know if the company will extend share buybacks into the future, the program has been another indication of proactive management that aims to deliver higher stock returns for long-term investors.
The Bottom Line on INTC Stock
Following the Intel earnings call on Oct. 25, investors have been rewarding stock in Intel. Intel’s 52-week price range has been between $42.04 (Feb. 9, 2018) and $57.60 (June 4, 2018). Furthermore, the Intel stock price has recently stabilized around the mid-$40’s level, and investors are now wondering if the technical chart can finally reflect the strength in Intel’s fundamental numbers.
Those investors who pay attention to short-term moving averages and oscillators should note that the chart message is a “buy.” Volume in the past few days has increased along with INTC’s price, which is yet another positive technical sign. Within the next two months, I expect INTC stock to trade between $45 and $53.
November may bring further volatility to the stock market; however, I find Intel stock to be a compelling buy candidate at current levels. If you are also of the opinion that the stock is ready for a rebound on either technical and fundamental grounds, you may want to add INTC to your portfolio this November. In 2019, patient long-term INTC investors are likely to be rewarded handsomely.
As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.
