Why The Skeptics Are Dead Wrong About Intel Corporation (INTC)

From a fundamental standpoint, continued weakness in personal computer (PC) sales has been a headwind for Intel over the past year as the company has traditionally dominated the manufacture of processors for PCs. Unfortunately, Intel has not traditionally held a strong position in chips for tablets and smartphones, both markets that have seen extraordinary growth even as PC sales have languished.

But the second half of 2013 holds several upside catalysts for Intel. First, the company plans to launch a new processor that’s cheaper to produce and should extend battery life in laptops. This chip could help to revive the ultrabook segment and boost Intel’s sales. In addition, the firm’s Bay Trail chip will power tablets that run Google’s Android operating system, giving the company exposure to a rapidly growing market segment.

Don’t underestimate a market dominator, either. Intel Corporation (NASDAQ:INTC) retains a more than 90% market share in chips used in servers. Demand for servers has been growing, powered in part by demand for servers at data centers. More data centers will need to be built in coming years to handle the increased Internet traffic caused by new trends such as cloud computing.

Finally, Intel Corporation (NASDAQ:INTC) is cheap trading at just over 12 times 2013 earnings forecasts. Expectations aren’t high for the stock and analysts have downgraded their forecasts after the company’s weak quarterly results released last month. But as a value play, it won’t take much of an upside catalyst to send shares of Intel sharply higher.

P.S. — As I mentioned before, Intel belongs to a special group of investments I call Forever Stocks. These are world-dominating companies that pay investors a healthy and growing dividend, dig a deep moat around their business to fend off competitors and buy back massive amounts of stock — which drives up value for the rest of the shares. The idea behind these stocks is simple: buy them and collect the growing value and dividend income they throw off every year. To get my report, “The 10 Best Stocks To Hold Forever,” and get access to my Top 10 Stocks newsletter, go here.

– Elliott Gue

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