Here is what some of us were looking for yesterday-Barron's article
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ntel (Nasdaq: INTC) is higher on the session Monday amid an upgrade at FBR Capital earlier (here) and positive mention in Barron's over the weekend.
Though lagging the S&P 500 over the last one-, three-, and five-year time frames, shares are outpacing expectations this year and some see the stock doubling within the next five years. Most suspect that gains will come as the Company gets a more-solid footing in the mobile market like smartphones and tablets.
Right now, about 67 percent of Intel's profits come from the ebbing PC segment. The Company has 80 percent market share in PC chips and 87 percent for laptop chips.
For mobile devices, most are run on ARM Holdings (Nasdaq: ARMH)-based chips from Samsung and Qualcomm (Nasdaq; QCOM).
Spending for Intel has ramped recently, which might cause near-term pain for investors. The Company is expected to spending about seven-times more than Qualcomm on research and development activities. Earnings in FY13 are expected to slip about 12 percent to $1.87.
This year, Intel is expectd to launch an Atom line of chips with 22-nanometer (nm) architecture, moving to 14-nm next year. ARM-based chips will still be at 28-nm by then. The smaller number equates to the space between lines; a smaller number provides for faster processing speeds, lower power consumption, or both.
Investors shouldn't jump to the conclusion that Intel moving further into mobile with spike numbers by that much. Barron's noted that, while desktop chips go for about $100 each and enterprise are around $600, chips used in mobile devices only sell for about $30 or less.
But, increased data from the slew of new mobile devices will call for an upgrade to server performance, with newer chips to boot. Intel has said that every 122 new tablets requires one new server, which uses two chips or more. The Company's server revenue is about one-fifth of the total and one Wells Fargo analyst sees the segment growing in the mid-teens percentage over the next few years.
On PCs, shipments are expected to drop 7.8 percent this year, flattening to 1.2 percent next year, according to IDC. Wells sees PC chip revs rising in the low-single-digit range, while laptop chips could see double-digit revenue gains.
Last, Intel's $12 billion of CapEx should help it cut manufacturing costs while helping it to win new business. The Company has inked deals with Microsemi (Nasdaq: MSCC) and Altera (Nasdaq: ALTR), and could potentially land a contract with Apple (Nasdaq: AAPL) as Apple tries to move away from Samsung.
Given that expectations for earnings of $3 per share by the end of the decade, applying a modest 15 times multiple results in a share price of $45. Adding in dividend over the next five years and that price moves to $50.
Intel is up 3.8 percent on the session.
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