3 Reasons Intel Corporation's Stock Could Rise

Here's a few reasons bulls may be excited about owning Intel stock today.

Aug 11, 2014 at 8:25AM

Intel Corporation (NASDAQ:INTC) is the world's largest vendor of processors for personal computers and servers. While that's great, what's really notable about the Intel story is that despite being the world's largest vendor of chips, it has virtually no presence in smartphones and a limited (but growing) presence in the tablet market.

This lack of a mobile presence hasn't stopped Intel's stock -- fueled by recent strength in the PC market and immense success in the server market -- from being a strong performer in 2014, returning 25.6% year to date against a Nasdaq up just 4.65% and a Dow Jones Industrial Average down 0.14%. 

However, despite a massive run, here are three reasons Intel stock could continue higher over the long-haul.

Mobile losses today mean lots of operating leverage tomorrow
In Intel's most recent quarter, the company generated $3.8 billion in operating income and $2.8 billion in net income. This is despite a $1.1 billion operating loss attributable to its Mobile and Communications Group (thanks to heavy investments in future chip technologies).

This investment level is very high today against a revenue base that's nearly nonexistent, as the Mobile and Communications Group did just $51 million in sales last quarter, but those losses are poised to narrow as Intel grows mobile revenue with the rollout of more competitive mobile products. 

With a $4 billion-plus annualized operating loss in this division eventually brought to breakeven or better, Intel could see a massive boost in operating and net income as this business grows into its cost structure. 

PC business could continue to be robust
One of the big fears surrounding Intel's recent performance is that the uptick in PCs may be temporary. It is no doubt true that Microsoft's ending Windows XP support has led many businesses to pull the trigger on upgrading their PCs.

Indeed, what makes this even more worrisome is that while business PCs are strong during this upgrade cycle, consumer PC sales continue to be weak in many key regions. If Intel can find a way to shift wallet-share back to PCs -- and it can potentially do this with stronger lower-cost PC chip offerings -- then PC sales could return to reliable, if somewhat slow, growth over the long term. 

With about 63% of Intel's revenues coming from the PC market, even slow and steady long-term revenue growth from this business could mean big things for Intel's bottom line (and its stock price). 

Big buyback ready to scoop up shares
Intel also announced on its most recent earnings call that the company's board of directors authorized a $20 billion buyback program -- good for about 12% of the company's shares outstanding. Though some of the buyback will be used to offset dilution from share-based compensation, the majority of this buyback is likely to go toward shrinking the company's share count, which will improve earnings per share for a given level of net income. 

Foolish bottom line
To see a significantly higher share price, Intel needs to not only execute in mobile, but it needs to also find a way to drive increased demand in its core PC business. If it can do those things, though, then the significant increase in net income would result in much higher earnings per share, ultimately paving the way to a much higher share price. 

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guaranteethat  its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel and owns shares of Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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