(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Intel Corp.'s (INTC) stock has climbed by nearly 12.2% in 2018, well ahead of the S&P 500's and the iShares PHLX Semiconductor ETF (SOXX) decline of approximately 1%, after reporting better-than-expected quarterly results on April 26. Following those strong results, analysts have been steadily raising their full-year revenue and earnings outlooks for the company, while also upping their price targets. Analyst's now seen Intel's stock rising an additional 16% from its current price around $51.90
Intel reported a blowout quarter, with earnings topping estimates by more than 6%, while revenue beat as well by more than 1%: A massive beat for a company posting revenue of $62.76 billion, and earnings of $3.46 per share. Even more, shares of Intel are cheap, trading at roughly 12.5 times one-year forward earnings estimates when compared to its peers.
Since April 5, analysts have upped their price target on Intel by nearly 12% to an average price target of $60, based on data from Ycharts. Of the 42 analysts covering the chipmaker, 60% of them rate shares a buy or outperform, an increase of 3% since the start of April. Meanwhile, the number of analysts rating it a hold has climbed by 3% to 36%.
Analysts have also been upping their revenue and earnings estimates of the semiconductor maker, with revenue estimates for the current year jumping by 4.1% to $67.68 billion and nearly 3% for 2019 to $69.24 billion. Earnings estimates have also climbed thus far as well with earnings estimates jumping by almost 7.7% to $3.86 per share, while forecasts for next year have increased by 5.5% to $4.03.
Cheap Vs. Peers
Intel shares are currently trading at only 12.8 times next year earnings estimates, and that makes Intel fairly valued versus its three-year historical average of 12.75. Over the past three years, Intel has seen its one-year forward P/E multiple expand as high as 14.9, and contract as low as 10.9. But when compared its peers, Intel is cheaper by nearly 2 points. Of the top 25 companies in the iShares PHLX Semiconductor ETF, the average one-year forward P/E multiple is 14.1, with a median of 13.3.
For Intel's stock to continue to rise in the coming months, it will need to deliver robust growth on both its top and bottom line. If it can do that, then it should reward shareholders with handsome profits.
Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the founder of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of two to three years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.