Why Some Analysts See Hidden Potential in Intel
Intel’s analyst price target
Over the past year, Intel’s (INTC) stock has been hovering between $33 and $36—even when the semiconductor industry caught investors’ attention. Nvidia (NVDA) was the star performer in 2017 due to its AI (artificial intelligence) revolution, while Intel’s stock fell due to delays in its adoption of AI, mobile, and smart computing. This has made Intel a cheap large-cap technology stock.
Wall Street analysts have maintained a $40 price target for Intel over the past five months, while they’ve raised their price targets for Advanced Micro Devices (AMD) and Nvidia. However, some analysts believe that Intel has plenty of growth potential in the long term.
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The Street’s co-founder Jim Cramer acknowledged Trefis concerns over competition from AMD and Nvidia but stated that Intel is addressing this issue. Intel could easily overcome competition from AMD by launching its advanced 10 nm (nanometer) chips in early 2018. Nvidia would be a tough competitor because of its superior autonomous car technology, but Intel could become competitive over the next few years with the help of Mobileye.
Intel’s has also taken several initiatives to refocus its efforts in fast-growing markets. It recently completed the Mobileye acquisition to tap the autonomous vehicle opportunity, and it’s been benefitting from the rift between Apple (AAPL) and Qualcomm (QCOM) by supplying modems and processors for Apple’s iPhone, iPads, and Apple Watch.
Given these factors, Intel could be a “great bargain” at its current price of ~$35, according to Jim Cramer.
Hilliard Lyons on Intel: a cheap stock
According to a Barron’s report, investment bank Hilliard Lyons also believes that Intel is a cheap stock. Its forward PE (price-to-equity) ratio of 12.5x is 30% below its peer group average and 40% below the S&P 500 Index (SPY). Remember, long-term investors generally look for low-PE stocks that can add value in the future.
Intel’s transition to fast-growing markets exposes it to a total addressable market of $250 billion by 2021. Moreover, the PC market, wherein Intel is a leader, is also showing some signs of stabilization.
Hilliard Lyons expects Intel’s earnings to grow 10% in 2017 and 4% in 2018. It has increased its price target for Intel from $41 to $44.
Schroders believes Intel has hidden value
Schroders portfolio manager James Gautrey believes that Intel has hidden value. Over the past two years, Intel has made several acquisitions, and now it’s integrating its acquired technologies with its existing technologies to develop new offerings.
James Gautrey believes that Intel’s stock price could increase if it gets its new products right. Notably, Intel’s stock price has been essentially flat over the past three years, despite the strong growth in chip demand. The right product could make Intel a value stock that delivers good returns over the next three to four years.