Intel Stock Is a Tremendous Value at $50

 

Intel stock deserves a lot more credit from investors

 

 It’s a booming market for most technology companies. However, some giants have gotten left behind. Intel (NASDAQ:INTC) is a fascinating case, as the market’s sentiment has turned harshly negative for Intel stock even though the company’s operating results are strong.

 

Since 2017, for example, Intel’s stock has risen from $33 to $50, making for a 50% gain. That’s a good outcome, right? Yet, bizarrely enough, Intel’s price-earnings ratio has gone down and sentiment has gotten worse for the company over this stretch. Back in 2017, Intel sold for 12-13x earnings. Now, it is down to a 9x P/E ratio.

 

Intel’s Improving Earnings

 

Back in 2017, Intel was earning around $2 per share per year in profits. And that had been relatively stable in prior years as well. Since then, however, earnings growth has exploded, with the company pulling in more than $5 per share in earnings last year. That’s 150% growth in a short period of time.

 

To be fair, Intel did receive a benefit from the corporate tax cut. That’s very real in the sense that it gives the company more profits with which to pay dividends and buy back stock, however it doesn’t reflect improvement in the structural quality of the business.

 

 

 

 

That said, earnings are up more than 150%; obviously that’s not just tax cuts. Since 2016, Intel’s revenues are up from $59 billion to $72 billion. That’s healthy growth. And management’s pre-Covid guidance saw this climbing to $85 billion annually over the next few years. The idea that Intel is totally stalled out simply isn’t accurate. What’s true is that the CPU business has minimal growth prospects.

 

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