Intel Corporation shares have been volatile over the last few months, but overall they performed well in 2014. Whether or not the chip maker will be able to sustain the strong performance remains to be seen, but an article from Seeking Alpha by Alan Tang, who evaluates Intel’s past experience, current financials, and expected growth, sees the chip maker “in a pretty good position for continued long-term success and stock appreciation.”
Server processor business-key growth driver
Intel’s key growth driver is likely to be its server processor business, which currently accounts for around one-fifth of the firm’s sales. The data center group of the company is looking strong, growing at rate of 11% in 2012 to 16% growth in the current year, and is forecast to grow at the rate of 15% between 2016 and 2018.
The chip maker could also surge higher with growth in other Intel Architecture segments. The company is making efforts to expand in the mobile device and tablet processor market. A recent announcement regaiding its ATOM processor for the mobile will narrow the distance in terms of power efficiency compared to ARM-based chips, says Tang. Intel has entered into multi-year agreements with Lenovo, Asus and Foxconn to develop mobile devices that run on Intel chips. Intel is the dominant force in the semiconductor industry, outselling its peers by a wide margin.
Intel appears undervalued
Considering its fundamentals, the company appears significantly undervalued as its EV/EBITDA is the lowest within its competitor group, just ahead of AMD, says Tang. The P/E ratio of the company continuing to strengthen at this point would suggest that Intel is a less expensive stock, and trading at a discount compared to its peers. Of note, Intel’s forward PE is lower than its current P/E, indicating growth in earnings going forward. The forward P/E of the company is not the lowest in the peer group, but it is still reasonable.
Tang notes that Intel is not as ‘strong a buy’ as it was six months ago, but upside can be expected. Three segments of Intel have earned significant revenue and performed better than expected. Furthermore, revenue is expected to grow at a steady pace. He believes that in the long-run, the chip maker is a safe buy considering the company’s strong income statement and healthy balance sheet, as well as its strong dividend.
