What Helped Intel Corporation Stock Rally This Year?

Intel LogoBy The original uploader was VD64992 at English Wikipedia [Public domain], via Wikimedia Commons

Intel Corporation (NASDAQ:INTC) shares had been disappointing investors for many years, trading range-bound between $22 per share and $26 per share. At that time, there were growing concerns over declining PC sales along with cut-throat competition, which prevented Intel from showcasing its ability to get its chips into tablets, mobile devices, or other higher-growth areas. But this all seems to be a past nightmare now, as shares of Intel Corporation broke the resistance in 2014 and surged from $25 per share to $34 per share.

Stabilization in PCs helped  

This increment did not seem to be driven by some buying sentiments, but it is because the company is doing fine with investing in emerging product areas along with stabilization in PCs, says a report from Motley Fool by Bob Ciura. The PC market is very important for the chip maker as it contributes around 62% of Intel’s revenue. This stabilization in the PC market helped the company to register a year-over-year PC unit growth for the last three quarters.

Also the ongoing PC refresh cycle has helped the chip maker push its most important segment. During the last quarter’s conference call, Intel noted that 600 million PCs are at least four years old and that the refresh cycle is stronger in the enterprise market. Intel Corporation expects its Bay Trail chips to perform well in such a scenario.

Intel needs to deliver

Ciura also believes that the company’s stock rose because it was considered cheap in comparison to others. Shares were moving range-bound for several years, and “now that Intel shares have soared on the expectation of future growth, there are much higher expectations embedded into its valuation,” he wrote.

The company’s growth is also because of its diversification in areas like data centers. Intel Corp’s data centers business witnessed an increase of 19% year over year to post record revenue of $3.5 billion. Along with this, the company also enjoyed growth in some exciting areas, such as the Internet of Things.

Intel itself projects 5% revenue growth this year. Before this, the company previously expected relatively flat revenue.  However, the author believes that even the 5% expected growth does not justify the rally witnessed by the stock.

For 2014, analysts expect Intel to earn $2.19 per share, which suggests approximately 16% growth over last year. However, if the chip maker fails to meet “this ambitious projection, the stock could see its rally halted,” believes Ciura.

About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com