Specifically, Altera brings a wide variety of field-programmable gate arrays (FPGAs), circuits used in creating Internet of Things connectivity. With the enhanced FPGA connectivity capabilities, Intel will be able to expand its serviceable Internet of Things market by approximately $11 billion. The Altera acquisition has been approved by the shareholders of both Intel and Altera and is expected to close within the next six to nine months.
Third Quarter Results
Superior brand positioning and innovation have been key to Intel Corporation (NASDAQ:INTC)’s success and have been helping value growth throughout all of the firm’s business segments. Its Intel Skylake processors helped the firm generate revenue of $8.5 billion in Client Computing in the third quarter despite considerable headwinds from lower personal computer sales. Meanwhile, Data Center grew 12% and 8% in the comparable and sequential quarters, respectively, and continues to capture market share in cloud computing. On the top and bottom lines, Intel reported strong growth overall in comparison to the second quarter. In the third quarter revenue was up 10%, while earnings increased 15% and earnings per share were up 16%.
Buying Opportunity
Growth in IoT and the firm’s strong market position in Client Computing and Data Center have helped to make Intel a leading investment among its industry peers. In peer ratio comparisons the firm is one of the most efficient technology companies in the technology industry in terms of gross margin. Intel has a trailing twelve month gross margin of 63%, behind only competitor Microsoft with a gross margin of 65%. Its TTM ROE is a leader among its semiconductor peers at 19.97%. It has also reported strong FCF and FCF to revenue. Its TTM FCF was $10.85 billion and its FCF to revenue over the past five years has averaged 19.15%.
The firm has a TTM dividend yield of 2.93% matching competitor Cisco and falling just behind IBM at 3.18% and Qualcomm at 3.11%. Its TTM P/E is trading slightly below its peers indicating it has upside potential in the current market, specifically following the strong third quarter earnings report and continued momentum across all of its business segments. Its TTM P/E is 13.67 versus 15.89 for Qualcomm and 31.84 for Microsoft.
Given the firm’s superior brand positioning, efficient operations and strong growth initiatives it appears poised to continue posting incremental gains for long-term value investors. Analysts have a similar outlook for the stock with a high target value of $40. Recent upgrades from JMP Securities and Northland Capital also further support the firm’s long-term value opportunity.
Disclosure: The author has no position in Intel or other securities mentioned in the article.
