Intel Corporation (NASDAQ:INTC) has managed to perform well in 2014 despite not so impressive forecasts with concerns over PC market and mobile segment, where the company is lagging behind rivals. However, the company has performed better than expected, and stock has also performed well. As few months are left in 2014, a report from Seeking Alpha by Bill Maurer discusses “what the company needs to do to get shares up to the $40 mark.”
PC momentum must continue
PCs are the core of Intel, and it is not a hidden fact to anyone. With Windows XP getting scrapped, there was a “bump” in the PC sales, but the performance in the future is yet to be seen. PC segment adds majority of Intel revenue and profits, and investors will be expecting the growth story of the segment to continue, even if at a slower pace.
The chip maker could not benefit from the aggressive mobile market; given it was a late entrant. However, over the past few quarters, the company has seen some important upside on the back of smart deals that are expected to fuel growth in the segment during 2015. The chip maker expects to ship 40 million tablets CPUs this year.
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There could be a major transformation calling next year in terms of profit and losses for the company. In the first half of 2014, mobile and communication group posted an operating loss of more than $2 billion. With the company loading manufacturer’s shelves with more tablet CPUs and planning to earn substantial revenues, losses are expected to come down slightly.
More dividend from Intel
Investors are not satisfied with the current dividend paid by Intel, which has been stagnant for quite a while now. Maurer believes that there are possibilities of a dividend hike in 2015 if the capital expenditure of the company is not very high next year, leading to a better cash flow. The company is looking forward to a target payout ratio at 40% of the free cash flow and has been outperforming in the recent years. Dividend is expected to “increase if the company decides to blow past that level again next year, or if free cash flow improves a bit,” believe Maurer.
Intel has given a strong performance in fiscal 2014, and the company is looking forward to continuing the trend in 2015. The chip maker will work towards pushing itself into the mobile segment more aggressively, and at the same time expect the PC momentum to continue.
In the end, Maurer says that if the chip maker “delivers a solid year, the multiple should expand, and that could push this name to $40 a share.”