Intel Stock Forecast: Why Intel Is The Superior Investment

motek 1This Intel stock forecast 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 October 7 article at Seeking Alpha concluded that Intel is the best stock to own if you want to bet on the semiconductor industry.
  • Intel’s 96% market share in data center processors and 84% share in desktop PC processors made it the better investment than Advanced Micro Devices.
  • Intel is a safe long-term investment because server processor buyers and PC manufacturers remain very loyal to Intel.
  • AMD can sell cheaper Ryzen processors and win some market share away. However, most PC builders and server/data center owners still prioritize Intel.
  • Top PC manufacturers continue to ignore Ryzen because they already bought and stockpiled Intel-compatible motherboards, RAM, and other PC parts.

I am lucky when it comes to stock picking. My October 7 buy recommendation for Intel (INTC) at Seeking Alpha was very profitable. Twenty-four days after that article’s publication, INTC has since returned +11.81%. Many investors apparently understood my October 7 explanation why INTC is a better investment than AMD.  Unlike the struggling Advanced Micro Devices, Intel has a very profitable desktop and server processor business.

intel stock forecast
(Source: Seeking Alpha)

The chart below again illustrates that Intel’s 96% market share in data center/server processors will never be threatened by AMD’s EPYC server processors. You should go long on INTC because the Q3 chart below showed Intel’s Data Center Group it still made $3.1 billion in quarterly operating profit. More importantly, Intel also increased average selling prices of data center-related products by 9%.

intel stock forecast

Why Intel Still Has A Monopoly on Data Center Processors

Unlike AMD, Intel has a great balance sheet. It can afford to offer volume/wholesale discounts on its pricey Xeon server/data center processors. Server farm owners and data center operators will always be loyal to Intel if they continuously get bulk discounts on Xeon processors.

Furthermore, the different socket design of AMD processors means data centers and PC manufacturers will always prefer the x86 processors of Intel. Big PC manufacturers and data center operators usually do wholesale purchases of motherboards and they stockpile them to cut costs and make sure they have enough boards should they need to expand their servers.

In other words, the epic failure of AMD EPYC is partly due to data centers not wanting to buy new motherboards that will be compatible with EPYC. They already have Intel-compatible motherboards in their inventories. The savings they could make from buying the more affordable (and reportedly more energy efficient) EPYC processors will turn to zero. There’s no savings if you will still need to buy new motherboards and RAM modules that will be compatible with AMD-made processors.

It is safer and cost efficient for server processor customers to just wait for Intel to deliver enough Xeon processors. They already have compatible motherboards and RAM/flash storage for Intel processors. The other reason why Intel continues to dominate in data centers is because it also offers deep learning/Artificial Intelligence accelerators. Let us not forget that the purchase of Altera made Intel the biggest supplier of FPGA processors which are used to speed up AI tasks in data centers. Microsoft (MSFT) already announced two years ago that FPGAs are better than Google’s (GOOGL) TPU (Tensor Processor Unit based on ASIC processor design) when it comes to AI acceleration.

In other words, unlike AMD, Intel can supply server/data center operators with x86 processors and FPGA AI accelerators. This combination obviously results in Intel capturing more beholden data center customers.

Next year, Intel will also probably ship out its Xe data center-centric stand-alone graphics processing units (GPUs). Intel Xe GPUs will be competing against Nvidia’s (NVDA) Tesla GPU AI accelerators and AMD’s Instinct Data Center Accelerator GPUs. Since Intel owns more than 96% of the data center processor business, it will have an easy time convincing its customers to prioritize Intel Xe GPUs over pricey Tesla server accelerator GPUs. 

Going forward, an Intel that could supply data center GPUs could elevate the Data Center Group or DCG into an $8 billion or $10 billion/quarter sales generator. If my theory proves correct, DCG’s quarterly operating profits could reach $5 billion.

Conclusion – Intel Stock Forecast

I am again endorsing INTC as a buy. I firmly believe in my Intel stock forecast – it can reach $60 before 2019 ends. It doesn’t make sense the investors pushed AMD’s stock above $30 and yet INTC continues to be super undervalued. AMD is a mirage of bloated expectations. On the other hand, Intel is a true blue-chip company with a monopoly on data centers. INTC, not AMD, actually deserves more than 50x P/E valuation. 

INTC trades at 13.19x trailing P/E and 3.30x Price/Book. It is obviously undervalued when compared to struggling AMD’s trailing P/E of 172.89x and 16.65x Price/Book.

(Source: Seeking Alpha)

My buy rating for INTC is congruent with its bullish one-year stock market outlook score from I Know First. My 12-month price target for Intel’s stock is now $63. Remember that by next year Intel will be mass producing 10-nanometer processors for laptops and data centers. Intel will also be a real discreet GPU vendor by 2020.

intel stock forecast

My fearless Intel stock forecast is that investors will push INTC’s price beyond $65 if Intel captures 10% to 15% of the global discreet or add-in GPU business. Selling discreet GPUs for data center acceleration will of course be a high-margin venture. Intel Xe data center GPUs will probably be sold at 50% gross margin.

Past Success With INTC Stock Prediction

I Know First has been bullish on INTC’s shares in past forecasts. On January 6, 2019, the I Know First algorithm issued a bullish forecast for Intel. The algorithm successfully forecasted the movement of the INTC’s shares. Until today, INTC’s shares have risen by 17.75% in line with the I Know First algorithm’s forecast out-performing the S&P 500 forecast. See chart below.

This bullish Intel stock forecast was sent to the current I Know First subscribers on January 6, 2019.

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