Intel Corporation (NASDAQ:INTC) initiated a major transformation around two years ago after a massive slowdown in the legacy PC business. The company has already started reaping the benefits of the transformation — but has a long way to go. We believe that Intel stock is a strong buy for long term gains.
Intel Corporation (NASDAQ:INTC) increased 3% over the last 12 months. Several Wall Street analysts think that Intel is highly undervalued. As of the end of July, Intel has a PE ration of 12.5, which is 30% below the industry average.
Intel Corporation (NASDAQ:INTC) is under threat from Samsung in China, while the company is facing a tough competition from NVidia and AMD in the US. But there are several growth catalysts on the horizon. Intel is the biggest benefactor of the legal battle of Apple and Qualcomm.
A new report suggests that Apple is planning to give Intel Corporation (NASDAQ:INTC) a production capacity of 70% of its mobile chips in the coming months. This would be a huge growth catalyst for Intel.
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According to wealth management firm Hilliard Lyons, Intel Corporation (NASDAQ:INTC)’s shares will gain a whopping 21% through the end of 2018 ($44 price target). The firm expects earnings growth of 10% and 4% in fiscal 2017 and 2018 respectively.
Intel stock earned $0.59 per share on $13.53 billion revenue in the second quarter, while analysts were expecting EPS of $0.53 and $13.54 billion revenue.
Intel Corporation (NASDAQ:INTC)’s gross margins in the second quarter increased by 120 basis points while operating income grew by 30%. The company has about $14.2 billion remaining under its share repurchase plan. Intel also expects to complete its $15.3 billion acquisition of Mobileye in the third quarter.
The Mobileye deal with give Intel a huge exposure to the lucrative self-driving cars industry, which will have a market worth of about $70 billion by 2030. Intel is well aware of the fact that the semiconductor industry is slowing at a rate of -1.2%. The company also acquired Altera in 2015 for $16.7 billion. Altera makes digital circuits for mobile chips.
Intel Corporation (NASDAQ:INTC) is also working on cutting costs and expenses. Earlier this year, the company announced to cut 12,000 jobs.
Intel Corporation (NASDAQ:INTC) is churning out high performance chips to keep up with the competition and demand. The company recently launched Xeon Scalable server processor, which is 1.6 times faster than the company’s previous chips.
Barclays analyst Blayne Curtis thinks that Xeon chips will put a cap on the threat level posed by AMD, as the new chips will face a rising demand from the AI and IoT industry. Intel is also set to launch its first 10-nanometer server chips by the end of 2017 — this could bode well for Intel stock holders.
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