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Intel Corporation (NASDAQ: INTC ) has transformed itself. The company's dependence on the declining PC market has hurt INTC stock. However, Intel news has been good as the company has made notable moves into new industries, and the stock has risen recently. With its new presence on high-growth technologies, INTC stock is again becoming a growth driver for tech investors.
Intel Has Long Been Tied to Declining PCs
The company maintains its title as the world's largest chipmaker. However, its heyday during the tech boom of the 1990s remains long behind it. Until recently, today's Intel seemed to have been left behind by Nvidia Corporation (NASDAQ: NVDA ) and other hardware giants engaged in bringing the world the latest products. This has forced INTC to remake itself in the age of the smartphone and tablet.
Until recently, Intel stock had taken on the appearance of a tech stock in the vein of International Business Machines Corp. (NYSE: IBM ) or Texas Instruments Incorporated (NASDAQ: TXN ). INTC became a stock that still maintained a good reputation and provided quality products. However, it had ceased to produce cutting-edge products demanded by the market. Today, Intel has finally made moves to follow in the footsteps of Microsoft Corporation (NASDAQ: MSFT ) and diversify away from PCs.
Intel Has Moved Into New Product Lines
One of Intel's strategies to revitalize itself involved doing what was once unthinkable: joining forces with its long-time archrival Advanced Micro Devices, Inc. (NASDAQ: AMD ). The company recently teamed up with AMD to produce a high-end laptop chip with AMD graphics and Intel processing.
Like Nvidia, INTC has also made moves to enter the self-driving car space by buying Mobileye . Additionally, it also acquiredSoft Machines to speed up its processing and efficiency of its chips. Intel also purchased Nervana to enhance the company's visibility in artificial intelligence (AI). The company has also made moves into the Internet of Things (IoT) market.
As our own James Brumley recently pointed out , the tech community has started viewing INTC as a PC company less and less. Data center solutions have become the company's second-largest revenue source. Analysts predict data center will grow into Intel's largest division as the PC business continues to shrink.
Additionally, interest in the chip sector overall appears to have increased. With Broadcom Ltd (NASDAQ: AVGO ) attempting to purchase Qualcomm, Inc. (NASDAQ: QCOM ), clear signs have emerged that even mature chip companies remain an important component of the tech industry.
Investors Have Noticed
As a result, the INTC stock price has started moving up again after being stuck in a range since 2014. The stock now trades more than 35% above July's low of $33.23. Its current price of about $45 per share remains well below the all-time high of $75.83 set in the summer of 2000. However, the stock trades at its highest level since the 1990s tech boom.
Despite trading at 17-year highs, INTC stock remains reasonably priced. Investors still appear to consider Intel as a mature, slow-growth stock. The stock trades close to a 16 price-to-earnings (PE) ratio. This compares well to Intel's rivals. Analysts expect AMD to trade at an almost 40 PE when it returns to profitability. Nvidia's PE currently exceeds 60, and Broadcom trades at over 200 times earnings!
Moreover, the company has paid dividends for 23 years. This dividend has risen most years and now stands at $1.09 per share, which is a yield of around 2.35%.
Still, revenue growth appears to lag the growth rates in other metrics. Current five-year revenue growth averages only around 2% per year. As INTC continues to diversify away from PCs, that growth rate will likely increase, moving into the mid- or high single digits.
Bottom Line on INTC Stock
Technology investors are again showing interest in INTC stock. With its moves into data centers and technologies such as IoT, AI and self-driving vehicles, Intel is again becoming an important player in the tech industry. Additionally, the stock trades at a bargain compared to its peers despite the large increase in the INTC stock price since July. Given the renewed interest and the rising stock price, having an "Intel Inside" sticker on one's stock portfolio will likely lead to outsized gains.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
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