Intel Corporation (NASDAQ:INTC) shares are hovering around $31 per share, reflecting investors’ confidence after the chip maker upgraded the second-quarter revenue forecast recently, along with estimating year over year growth in the PC client group for the first time since 2011. While PC market is stabilizing gradually, mobile is still a concern for Intel.
R&D raises hopes
The growth of the chip maker depends upon three factors, stabilization of PC sales, which is materializing; growth opportunity in the mobile phones; and steady cash flow and growth from data center group, according to a report from Forbes by David Trainer. Mobile front remains challenging for Intel, and Trainer believes that any improvement in the segment will be postponed to 2015 or early 2016.
Intel is, however, putting all efforts and expertise to grab a pie in the mobile market; as the company is spending a large amount of cash on R&D. In the first quarter of 2014, Intel has spent 22% of revenue on R&D, an increase from 20% last year. The chip maker has been a slowcoach in the mobile market, but its heavy investment in the R&D raises hopes that the company would be able to carve a niche for itself in the market. Brand name, technical know- how and enough resources of the company will drive its growth in the market, feels Trainer.
Trainer stated that he still suggests investing in Intel, but is not as much bullish as he was in November, when he suggested 100% upside in the valuation from then $25/share. Trainer downgraded the stock from Very attractive to Attractive saying that Intel is a good stock for value investors, but not as great as it was eight months ago.
SIG positive on Intel
Analyst Chris Caso of SIG notes in a research report dated July 8, 2014 that there is a potential upside in the semiconductor companies across the board. Intel increased its second-quarter revenue guidance up 7% quarter over quarter, which was in line with the “checks that showed notebook unit production growth of 5-10% Q/Q.” Additionally, the analyst is expecting Intel to give a confident outlook on their wireless business, during the July call, “since we believe INTC has secured wins on Samsung’s mid-range phones with their 7260 LTE modem.” The research report noted that in the near term stock will be Neutral, but there is no specific negative factor, “given conservative consensus estimates.”