Equity research firm MKM Partners published an investment report on Intel Corporation (NASDAQ:INTC) on Wednesday, August 20th. In the report, MKM Executive Director Ian Ing highlights the short- and long-term prospects of Intel, and suggests that the iconic semiconductor maker is just entering the early stages of a ten-year earnings cycle related to the growth of Big Data.
Despite this relatively sanguine outlook for Intel Corporation (NASDAQ:INTC), Ing maintains his Neutral rating and $36 12-month price target on the stock.
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Intel short-term prospects
The report argues that Intel is likely to enjoy favorable tailwinds over both the short- and long-term. Ing points to the fact that corporate IT spend is moving up again, the upcoming Grantley Server launch, as well as the Windows Server 2003 obsolescence in mid-2015 as potential near-term catalysts.
Intel is also looking good over the short-term according to Ing, given that “…demand from cloud computing and HPC data-center customers drives both units as well as ASP’s, as these customers in particular migrate to an ever-increasing “top-end” of the product stack as they prefer silicon with the highest performance and features.”
Intel long-term prospects
The MKM report is also positive about Intel Corporation (NASDAQ:INTC) over the long term. It points to the firm’s exposure to Big Data and Internet of Things (IoT), as it will gain sales on both the hardware side (IoT), as well as the analytics side (Big Data). Of note, only around 6% of IT departments nationwide are currently using Big Data analytics, meaning a huge amount of growth potential.
Moreover, Ing highlights that there are a lot of cross-selling points between IoT and Big Data, as greater connectivity and data collection related to IoT drives the demand for smart Big Data solutions. Intel’s 18% equity stake in Cloudera is an example of the company’s assets in Big Data analytics. According to the report, Intel is looking at it’s $4.1 billion investment in Cloudera with a 10-year ROI horizon.
Intel Corporation (NASDAQ:INTC) also wants to take control of its own destiny in the data center sector. The strategy to date is to beef up its data center exposure as much as possible as long as its does not directly compete with any OEMs. In fact, Intel specifically mentioned plans to participate in flash memory/enterprise SSD, as well as optical connectivity (spanning the entire data center) to improve overall server performance. Ing notes that Intel’s strategy could spell trouble for Avago Technologies Ltd (NASDAQ:AVGO) and Finisar Corporation (NASDAQ:FNSR) in the optical connectivity industry, as well as Micron Technology, Inc. (NASDAQ:MU) and SanDisk Corporation (NASDAQ:SNDK) in the memory sector.