I am is bullish on Intel (NASDAQ:INTC). This highly profitable company’s stock trades at a 12.1x forward P/E.
Intel is still the dominant leader in x86 consumer and server processors. It touts 90.5% market share in x86 server processors, and 77.5% of the total x86 processors sold in Q2 2021.
INTC is currently trading at a 22.1% discount from its 52-week high of $68.49. (See Intel stock charts on TipRanks)
Big Boost from Windows 11
As the dominant vendor of x86 processors, Intel benefits a lot from Microsoft’s official confirmation that Windows 11 requires Trusted Platform Technology, or TPM 2.0.
This policy also applies to Windows 11 installed on virtualization software made by VMware (NYSE:VMW), Citrix (CTXS), and Oracle (NYSE:ORCL).
Sales of laptops, desktop PCs, and workstations still account for 54.5% of Intel’s $18.5 billion quarterly revenue. Microsoft’s TPM 2.0 requirement for Windows 11 could probably add $2 billion to $4 billion in Intel’s upcoming Q3 and Q4.
Most people do not how to enable TPM 2.0 on their current computers’ motherboard. It is hard to find TPM 2.0-compliant motherboards and x86 processors on older laptops and desktop PCs.
TPM 1.2 was the prevalent chip embedded on a majority of recent computer motherboards and processors.
Just Buy New Computers
There are now 1 billion Windows 10 users. Many of them probably want the upcoming October 5 free upgrade to Windows 11.
The easy thing to do for loyal Windows PC users would be to buy new TPM 2.0-compliant computer products, as software updates cannot not make TPM 1.2 hardware-equipped computers become TPM 2.0-qualified.
Windows 11 offers improved performance, hardened hardware-based security, integrated Android apps, and better touchscreen support.
Invest While INTC is Cheap
Intel is still the No. 1 semiconductor vendor. Its 15.6% market share is not reflected in INTC’s valuation ratios.
Source: Motek Moyen
Intel touts 27 years of increasing dividend payments, while Advanced Micro Devices (NASDAQ:AMD) has never paid dividends to its shareholders. Nvidia (NASDAQ:NVDA) only started giving small dividend payments in 2014.
Safe Long-Term Investment
Intel’s stock boasts a Piotroski F score of 8. It is therefore considered a strong value stock. This company’s total cash position is $24.9 billion. Net operating cash flow is $32.4 billion.
Intel’s short-term assets of $49.4 billion exceed its short-term liabilities of $42.8 billion.
Wall Street’s Take
The consensus among Wall Street analysts is that Intel is a Hold. This is based on nine Buys, 10 Holds, and seven Sells. The average INTC price target is $61.14, implying 15.1% upside potential.
Conclusion
Relative undervaluation, generous dividend payments, robust financial health, and dominant x86 processor leadership are reasons to be optimistic regarding Intel.
Disclosure: At the time of publication, Motek Moyen did not have a position in any of the securities mentioned in this article.
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