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Is Intel Corporation (INTC) Really Worth $116 billion?

Intel Corporation (NASDAQ:INTC)Shares of Intel Corporation (NASDAQ:INTC) are currently trading for about $23.30. That price gives the Dow Jones Industrial Average (Dow Jones Indices:.DJI) component a market cap worth $116 billion. Is the chip maker really worth that much? Or perhaps the stock is undervalued today. Let’s have a look.

At today’s prices, Intel Corporation (NASDAQ:INTC) shares sit just about halfway between their 52-week highs and lows.

A year ago, share prices had more than doubled from market-panic lows set in 2009. But investors quickly lost faith in Intel Corporation (NASDAQ:INTC) stock last summer, because tablets and smartphones were crushing the traditional PC market. And Intel was never much of a player in the mobile game. When fireworks lit up the New Year’s night, Intel shares had fallen 23% since the August peak.

The stock has made a decent comeback in 2013, but it’s not a full recovery. All told, Intel Corporation (NASDAQ:INTC) shareholders (including yours truly) are lagging the Dow over the last year.

INTC Chart

INTC data by YCharts.

So it’s safe to say that Intel shares aren’t riding any kind of momentum bubble right now.

Intel Corporation (NASDAQ:INTC)’s P/E ratio is a historically low 12.6 times trailing earnings. Only five Dow stocks trade at lower P/E ratios today. Microsoft Corporation (NASDAQ:MSFT) is one of them, trading at 12.3 times earnings under the same PC-market pressure that’s haunting Intel.

I would argue that Microsoft Corporation (NASDAQ:MSFT) deserves a bargain-bin valuation, whereas Intel Corporation (NASDAQ:INTC) doesn’t. That’s why I own one stock and not the other. Both companies have largely failed at penetrating the mobile market so far. Intel’s mobile processors haven’t gained any traction with system builders. Microsoft tried its hand at self-branded tablets while pushing Lumia smartphones through chief partner Nokia Corporation (ADR) (NYSE:NOK), and the two companies are still searching for their first success stories. However, Intel broke out with a new chip that actually appeals to tablet builders.

Moreover, Microsoft Corporation (NASDAQ:MSFT)’s tenure in the data center is fading. In a survey by analyst firm IDC, Windows-based servers saw their market share stalling in 2012, while Linux systems are growing. Sales of server systems based on Intel-compatible chips grew 4.1% last year, even as the overall server market shrank by 1.9%.

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