Back to top

Intel (INTC) Looks Promising on Upbeat Q3: Should You Buy?

Read MoreHide Full Article

Sharesof Intel (INTC - Free Report) have been rallying since third-quarter 2018 earnings release on Oct 25. In fact, the company stock has returned 6.1% in the past year, against the industry's decline of 9.8%. Its price performance is backed by an impressive earnings surprise history. The company surpassed earnings estimates in the trailing four quarters, recording average beat of 18.7%.

Intel delivered third-quarter 2018 non-GAAP earnings of $1.40 per share, which beat the Zacks Consensus Estimate by 25 cents. The figure surged 45.8% from the year-ago quarter and 33.3% sequentially.

Strong earnings growth was driven by better-than-expected top-line performance, operating margin expansion and lower effective tax-rate.

Revenues totaled $19.163 billion, up 18.7% year over year and 13% quarter over quarter. The figure comfortably surpassed the Zacks Consensus Estimate of $18.115 billion.

The year-over-year improvement came on the back of impressive results from both data-centric and PC-centric businesses.

Meanwhile, the consensus estimate for the company’s 2018 and 2019 earnings has also been revised upward by 9.7% and 7.7%, respectively, over the past 60 days, reflecting optimism in the stock’s prospects.

Let’s delve deeper and analyze the factors that make this stock a lucrative pick.

What Makes Intel a Solid Pick?

The company introduced new 8th Gen Intel Core processors in the reported quarter in a bid to offer an ultra-portable laptop experience. Intel’s dominance in CPU market is anticipated to improve with the new processors for sleek laptops. The new CPUs are likely to pave the way for ultra-thin PCs.

The company also introduced the Intel Core i9-9900K gaming processor.

The new CPUs are powered with robust performance features, enhancing productivity of mainstream laptops.

Per a Market Research Future report, global 2 in 1 laptop market is envisioned to witness a CAGR of 20% from 2017 to reach approximately $3.4 billion by 2023.

The emergence of high-end cloud computing, thinner laptops, and demand for fast processing is expected to bode well for the newly introduced CPUs.

Intel’s strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is also bearing fruit.

The company’s first Optane DC Persistent Memory has been selected by the likes of Alphabet’s (GOOGL - Free Report) Google, Microsoft (MSFT - Free Report) and Alibaba (BABA - Free Report) .

Further, Intel Xeon Scalable noted 95 new performance records globally as robust adoption continues. Taboola and Rolls-Royce remain notable customer wins for Xeon.

After prolonged sluggishness, PC shipments reported sturdy growth in third-quarter 2018, according to latest data from the research firm — Gartner. This bodes well for Intel. Preliminary data released by Gartner exhibited that PC shipments in the third quarter increased 0.1% year over year to 67.2 million units. The firm believes that the PC shipments benefited from higher demand in business markets due to migration to Windows 10. The positive comments on the PC market by the industry expert will provide respite to not just PC vendors but also the companies dependent on the industry. An improving trend in PC shipments benefits the business prospects of Intel, which continues to depend considerably on PC sales.

The company has an impressive VGM Score of A. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) make solid investment choices.

For fourth-quarter fiscal 2018, Intel expects earnings to be $1.22 per share, up 13% on a year-over-year basis. The Zacks Consensus Estimate is currently pegged at $1.22.

Revenues are projected to be around $19 billion, up 11% year over year. The Zacks Consensus Estimate is currently pegged at $19 billion.

These aspects make us optimistic about this Zacks Rank #1 stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hottest Tech Mega-Trend of All                

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

More from Zacks Analyst Blog

You May Like

Published in