Why Intel Stock Deserves a Serious Look
“5G stock” has been a buzzword for quite a few years now, so it shouldn’t come as a surprise that many 5G stocks have enjoyed incredible rallies. After all, investors love tech stocks, and to most consumers, 5G is at the frontier of technology.
If you’re just getting into the market, you might find the situation a little frustrating since most 5G stocks are trading at substantially higher levels than before. But the good news is, not all 5G stocks have shot through the roof.
Note, I’m not talking about some micro-cap stock that no one has heard of. I’m talking about mega-cap tech giant Intel Corporation (NASDAQ:INTC).
Intel is well positioned for the 5G era, yet the price of INTC stock is actually lower than it was last summer.
Intel is known more as a legacy tech company than a “next big thing” play, but the company has been benefiting from the deployment of 5G.
Intel Corporation (NASDAQ:INTC) Stock Chart
Chart courtesy of StockCharts.com
In the company’s latest earnings conference call, Intel’s chief executive officer, Pat Gelsinger, said, “Just a year ago, we were very — just 3 years ago there was grave geopolitical concerns around 5G and would there ever be flexibility for how that would get deployed nationally [sic].” (Source: “Intel Corporation (INTC) CEO Pat Gelsinger on Q2 2021 Results – Earnings Call Transcript,” Seeking Alpha, July 22, 2021.)
He continued, “Now, everybody is aligning against the O-RAN, vRAN initiatives as the way to do their 5G broad deployments. And the Intel platform sits in the center of those almost everywhere in the world. It really is a great success story for us and one that we think that we’ll be harvesting from many, many years to come.”
In fact, because Intel Corporation has such an expansive range of products, it’s well positioned to capitalize on a bunch of “next big things.”
The company’s data-centric businesses include Data Center Group, Internet of Things, Mobileye, Non-Volatile Memory Solutions Group, and Programmable Solutions Group. So whether it’s the Internet of Things, cloud computing, or driverless cars, this legacy tech giant has got it covered.
Intel Corporation’s PC-centric business—Client Computing Group—used to be a weak point, as global PC shipments seemed to plateau a few years ago. But with the COVID-19 pandemic and the resulting work-from-home and learn-from-home environment, PC shipments started rising again and Intel’s PC-centric segment has turned into a growth driver.
Just take a look at the company’s latest earnings report and you’ll see what I mean.
In the second quarter of 2021, Intel’s Client Computing Group brought in $10.1 billion of revenue, which not only represented a six-percent increase year-over-year, but also marked a new second-quarter record. (Source: “Intel Reports Second-Quarter 2021 Financial Results,” Intel Corporation, July 22, 2021.)
Notably, the company’s PC platform volumes increased by 33% from a year earlier.
Of course, as you might infer from Intel stock’s lackluster share-price performance, it wasn’t all sunshine and rainbows. In particular, the company’s Data Center Group revenue slipped by nine percent year-over-year to $6.5 billion.
Still, Intel Corporation is deeply entrenched in the cloud industry.
Major cloud service providers, including Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL), Alibaba Group Holding Ltd (NYSE:BABA), and Baidu Inc (NASDAQ:BIDU), are offering services based on Intel’s third-generation “Xeon” scalable processors.
The company has been capitalizing on the Internet-of-Things revolution as well. During the second quarter of 2021, Intel’s Internet of Things Group revenue rose by 47% year-over-year to $984.0 million, while its Mobileye revenue more than doubled to $327.0 million.
For the company as a whole, Intel Corporation’s second-quarter non-generally accepted accounting principles (non-GAAP) revenue totaled $18.5 billion, which was up by two percent year-over-year and exceeded management’s guidance by $700.0 million.
At the bottom line, the tech giant generated adjusted earnings of $1.28 per share, up by 12% from a year earlier and exceeding management’s guidance by $0.23 per share.
For full-year 2021, management expects Intel Corporation to earn $73.5 billion in non-GAAP revenue and $4.80 in adjusted earnings per share.
In the world of 5G stocks, INTC stock isn’t the hottest ticker, but Intel Corporation plays a critical role in multiple high-growth tech segments.
While Intel stock’s recent share-price performance hasn’t been stellar, it could be an opportunity for tech investors with a long-term horizon.