INTC Stock Forecast: Intel’s True VR Technology’s Biggest Opportunity Is In Enterprise Training

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • My last buy rating for Intel was last January 8. INTC was trading at $47 back then. It is now trading at $51.39.
  • I hope that discussing Intel’s True VR technology will convince more investors to rally behind INTC.
  • Intel has no smartphone processor but it sure has cutting-edge Virtual Reality products and solutions.
  • Aside from showroom, video games, and live sports, the biggest opportunity in Virtual Reality is actually in skills training.
  • As per the Q4 2018 survey of Super Data Research, training is the top reason why enterprise are adopting virtual reality technology.

Intel (INTC) is in a great position to profit from the rising adoption of Virtual Reality products and services. International Data Corporation expects worldwide spending on Augmented Reality and Virtual Reality to hit $20.4 billion this year. This is over 68% higher than the $12.1 billion spent last year. AR/VR spending is expected to have a CAGR of 69.6% until 2022.

The True VR technology should help Intel become one of the top beneficiaries of the massive growth in AR/VR spending.

(Source: Intel)

Intel’s True View camera technology will allow sports fans to watch the action from every 360 degree angle. This capability should also help Intel profit big from skills training. A survey done by Super Data Research revealed that most enterprise adopters of AR/VR are using it for training or skills development of their employees/partners.

Training is the most used application of VR/AR technology. Seventy one percent of those surveyed by Super Data Research said they are using VR/AR for training purposes. This is far greater than those who use it for design, research or showroom purposes.

(Source: Super Data)

Enterprise customers will account for the bulk of this year’s estimated $20.4 billion global spending on Virtual Reality, Augmented Reality, and Mixed Reality. If we guesstimate that enterprise customers will account for 70%, training-centric AR/VR could probably be worth $10.14 billion.

Enterprise spending for 2019 is estimated to be worth around $13.1 billion. Providing True View cameras and True VR technology as the go-to alternative to traditional company training sessions, Intel can earn $500 million to $2 billion in new revenue.

(Source: Super Data)

Why Intel Needs The Virtual Reality Business

VR is an important expansion move because Intel might soon lose its smartphone modem deal with Apple (AAPL). Sad but true, Apple is only using Intel’s 4G modems because it is in a bitter court battle with Qualcomm (QCOM). Qualcomm refused to sell its modems for use in the iPhone XS and XR models. Qualcomm is very upset at Apple for bringing it to court over alleged exorbitant 3G/4G patent licensing fees.

The risk is that Apple could only be using Intel’s modems so it can learn to design its own in-house 5G modems for future iPhone and iPad products. Apple used the same tactic of using and then making its own mobile GPUs based on its former GPU partner Imagination Technologies’ design and IP.

Intel needs more buyers and customers of its Virtual Reality products and services to offset the possibility of losing the iPhone modem supply deal with Apple. If Intel do lose the iPhone modem supply business next year, INTC might drop below $50 again.

Why True View and True VR Are Important

Becoming a top provider of Virtual Reality-powered skill training hardware/software could help INTC recover back to its old 52-week high of $57.60. There are no government-approved self-driving vehicles on the road to date. It will take a long time before Intel can have any notable return on its $15.3 billion gamble in buying Mobileye.

I do not think Mobileye is capable of contributing $1 billion to Intel’s annual revenue within the next five years. The big opportunity in Virtual Reality-powered training is more probable of contributing $1 billion in new annual revenue for Intel.

The Training Industry Is A Massive Opportunity

One of the biggest recurring overhead expenses of many companies is from the continuous training of their current and new employees. It is an open secret that even MBA graduates still have to train new sets of skills to be more useful to companies who hired them.

Training people is a massive global business. As of 2018, the training industry had a market size of $366.2 billion. This covers the cost spent through company internal training programs, university, technical institute training tuition, and third-party training service providers.

On average, companies allocate 39% of their training budget to hire outsourced training service providers. North America’s outsourced training service industry was worth $65.9 billion in 2018. The in-house training expense of North American firms was $101 billion last year.

(Source: Trainingindustry.com)

If Intel can provide lower-cost VR/AR-based skills training solutions to corporations, it has a good chance to earn $0.5 billion to $2 billion in new annual revenue.

Conclusion

The True View and True VR products of Intel uses x86 processors like Xeon and Core i7 to deliver a real-time 360-degree Virtual Reality immersive experience. The Virtual Reality business is therefore a new sales channel where Intel can sell more pricey processors and flash storage.

The data center component of a Virtual Reality-powered training service obviously will help Intel sell more server processors and FPGA accelerators. True View and True VR are therefore emerging tailwinds to Intel’s core processor business. Desktop and server processors account for more than 80% of Intel’s revenue and net income. Virtual Reality is therefore an important industry that Intel is rightfully focusing on.

I Know First has a bullish 12-month market trend forecast score of 105.71 for INTC.

How to interpret this diagram.

As a supporting argument, INTC also has buy signals from monthly technical indicators and moving averages trend patterns. Let us all add more INTC shares while it trades below $52.

(Source: Investing.com)

Past I Know First Success with INTC Stock Forecast

I Know First has been bullish on INTC shares in past forecasts. On September 10, 2017, the I Know First algorithm issued a bullish 1 year forecast for INTC with a signal of 38.77 and a predictability of 0.44, the algorithm successfully forecasted the movement of the INTC share.  After a year, INTC shares rose by 31.57% in line with the I Know First algorithm’s forecast. See chart below.

This bullish forecast for INTC was sent to I Know First subscribers on September 10, 2017.

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Please note-for trading decisions use the most recent forecast.