Last Friday was a day to remember for shares of semiconductor giant Intel (NASDAQ:INTC). The December jobs report blew expectations out of the water and quelled fears of a looming recession. Federal Reserve Chair Jerome Powell publicly said he will be “patient” with rate hikes in 2019. And, on top of all that, Bank of America Merrill Lynch upgraded INTC stock to Buy.

The convergence of these positive catalysts sparked a big pop in Intel stock.

That’s the good news. The great news is that this INTC stock rally is far from over. Despite concern that the global semiconductor space is slowing, Intel has enough long-running drivers to keep growth both stable and healthy for the foreseeable future. Meanwhile, the stock trades at less than 10x forward earnings. That combination of healthy growth and cheap valuation is a recipe for success for Intel stock.

As such, it seems likely that Intel stock not only stays on an uptrend, but actually finishes 2019 substantially above $50.

INTC Fundamentals Are Strong

The big concern with Intel stock is a rapid tightening in the global semiconductor market after staying red hot for most of 2017 and 2018. Now, over-capacity and demand issues related to the U.S.-China trade war are cooling things off for chipmakers.

Need proof? The global semiconductor market just reported its first month-over-month decline in sales in nine months, and is expected to go from a healthy double-digit growth industry in 2018, to a sub-3% growth industry in 2019.

Intel is not immune. But, the company has enough exposure to secular growth industries to keep growth stable amid this global semi slowdown.

Intel has built out a robust data-centric portfolio of businesses that is growing very rapidly. Year-to-date, its data-centric business has grown revenues at a 20%-plus clip. Growth in this business will slow in the months ahead. But, medium- to long-term demand from data and AI-related end-markets will remain healthy. As such, growth in the data center business should be able to stabilize around the mid-to-high single-digit range, while more complex products should boost margins.

Meanwhile, the PC business recovered nicely in 2018, going from 3% growth in the beginning of the year, to 16% growth last quarter. Growth here will slow, too, but, it won’t completely evaporate. This is a stable business with solid demand drivers that should be able to, at-worst, report flattish sales growth in the medium to long terms.

Overall, then, INTC stock is supported by low-to-mid single-digit revenue growth potential and gradual margin expansion over the next several years.

Valuation Is Dirt Cheap

At current levels, Intel stock’s valuation does not appropriately reflect the company’s realistic growth potential.

Conservatively speaking, this is a low single-digit revenue growth potential company. On top of margin expansion and buybacks, that should easily flow into mid-to-high single-digit earnings growth over the next several years.

That sort of earnings growth is pretty good. Indeed, it is fairly normal for Intel. But, the valuation on Intel stock is anything but normal. This stock has traded, on average, around 13x forward earnings over the past five years. Today, that multiple sits below 10x.

So, with Intel stock trading at a huge discount to its historically normal valuation but growth prospects looking healthy and normal over the next several years, there’s a disconnect that implies room for a rally in 2019.

Upside To $50 Is Achievable

Modeling out Intel’s growth trajectory over the next several years, it becomes obvious that Intel stock has upside to $50-plus levels in 2019.

Let’s say revenue hit the consensus $71.2 billion estimate this year. To be conservative, let’s also say that revenues grow by just over 2% over the next five years, despite a global average semiconductor growth rate over the past 20-plus years of 7%. That would put annual revenue around $80 billion five years out.

During that stretch, gross margins should trend slightly up due to expansion into higher-margin end-markets. Also, opex rates should drop slightly due to consistent revenue growth. All together, operating margins will likely shake out around 36% in five years, versus 34.5% expected this year.

Combining $80 billion of revenue with a 36% operating margins makes $5.50 seem like a reasonable EPS target by fiscal 2023. A historically normal 13x forward multiple on that implies a fiscal 2022 price target for Intel stock of $71.50. Discounted back by 10% per year, that equates to a fiscal 2019 price target in the mid-$50’s.

Bottom Line on INTC Stock

Intel stock is cheap, with stable growth potential, and broad exposure to multiple secular growth markets. As an investor, you couldn’t ask for much more. Don’t be surprised to see INTC stock climb above $50 in 2019, even if broader markets struggle.

As of this writing, Luke Lango was long INTC.