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Intel Rides on AI, IoT Growth Potential, Competition Hurts

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On Aug 31, we issued an updated research report on California-based Intel Corporation (INTC - Free Report) . The company is one of the world’s largest manufacturers of semiconductor products.

Intel has beaten the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive surprise of 5.59%. The company reported better-than-expected fiscal second-quarter 2017 results. Both the top and bottom lines surpassed the respective Zacks Consensus Estimate and also improved year over year.

Moreover, management raised the bottom-line guidance for fiscal 2017. Earnings are now anticipated to be $3.00 (+/- 5%) per share, up from the previous guidance of $2.85.

Notably, Intel stock has lost 2.1% year to date, underperforming the 18% rally of the industry it belongs to. We believe that new product releases along with improving growth opportunities in Artificial Intelligence (AI), Virtual Reality (VR), High Performance Computing (HPC) and Internet of Things (IoT) will help shares rebound in the long run.

Key Factors

Intel’s recent launch of Xeon Scalable (formerly known as Skylake), which is 1.6 times faster than the prior-generation product is a game changer in our view. The company had already delivered 500,000 units of Xeon Scalable to over 30 customers till the announcement of second-quarter results.

Intel also unveiled Movidius Myriad X chip aimed at deep learning, which will ultimately strengthen its position in the IoT market.

Moreover, the company is focused on fast penetrating the rapidly growing advanced driver assistance systems (ADAS). The acquisition of MobilEye has significantly expanded its product portfolio.

Further, the announcement of the formation of a consortium for building autonomous car ecosystem is a key catalyst as it improves Intel’s competitive position against the likes of Alphabet (GOOGL - Free Report) .

Additionally, we expect the launch of Core 8 processors to boost the company’s PC market share amid intense competition from Advanced Micro Devices Inc. (AMD - Free Report) . Notably, top-PC makers like HP, Lenovo, and Asus are set to launch PCs based on Qualcomm’s (QCOM - Free Report) ARM-based Snapdragon processor, which is a headwind for Intel.

Zacks Rank

Intel currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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