Why Intel Is a Strong Buy

Intel (INTC) announced second quarter ended June 30, 2016 total non-GAAP revenue of $13.5 billion, down 2 percent sequentially from $13.8 billion in first quarter of 2016 but, up 3 percent year-over-year compared to $13.2 billion of non-GAAP revenue in second quarter of 2015. Going forward, Intel estimates third quarter of 2016 non-GAAP revenue to be in the range of $14.4 billion to $15.4 billion.

Robust growth

Intel declared second quarter of 2016 non-GAAP net income of $2.9 billion or $0.59 per share, up 9 percent sequentially from non-GAAP net income of $2.6 billion or $0.54 per share in first quarter of 2016 but, down 6 percent year-over-year from $3.1 billion or $0.62 per share of non-GAAP net income in second quarter of 2015.
Moving ahead, the company forecasts third quarter of 2016 non-GAAP gross margin of 62%.

The global computing technology company reported continued sequential and year-over-year growths in both its top and bottom lines primarily driven by a significant company’s strength in the areas of the Internet of Things, data center and innovative programmable solutions.

Focus on aggressive expansion  

Intel’s virtuous expansion cycle comprises of superior connectivity between memory, FPGA, cloud and data center and all other things and devices.
Why Intel Is a Strong Buy
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Moreover, there’s an expectation of a significantly large data explosion in the near future and over the longer term as the whole world steadily moves towards technological advancements.

The fast approaching data flood by the fiscal year 2020 would comprise of approximately 1.5 GB of total online traffic per day for an average internet user, 3,000 GB of consolidated data flowing per day through smart hospitals, every autonomous automobile is expected to deal with 4,000 GB of data per day, airplanes are expected to manage 40,000 GB of data per day and further, smart factory is believed to deal with 1,000,000 GB of data each day.

In addition, the continued year-over-year top line growth for Intel is expected to continue to expand primarily driven by significant high-priced chip demand from the global technology giants including, Facebook (FB), Amazon (AMZN) and Google (GOOG) (GOOGL). In a recent survey by Gartner Inc., global PC sales are continuing to decline consistently and significantly year-over-year mainly due to the rising penetration of mobile and handheld devices such as tablets and smartphones and thus, requiring the global chip-maker to quickly enter the fast-paced mobile devices market to soon capture a majority of the market share while avoiding to lose its share against its key competitors.

There’s significant growth opportunity for the chipmaker by leaving aside the declining PC market and focusing on the consistently expanding and changing mobile devices market. Therefore, Intel needs to deliver superior innovation in developing advanced computing chips for the mobile devices such as smartphones and tablets.

Intel Corporation and TPG recently entered into a contract to develop an independent and jointly-owned cybersecurity company that would be called McAfee. Intel is expected to have 49 percent ownership in the transaction while TPG is believed have 51 percent ownership of McAfee. Hence, this strategic partnership of an industry-leader in alternative assets and having notable expertise in expanding lucrative software companies while carving out high-growth investments with Intel which is a worldwide technology leader, powering billions of cloud-enabled smart and connected computing equipment is believed to hugely capitalize on notable worldwide expansion opportunities through superior focus and well-planned investments.


Overall, the investors are advised to “Buy” equity in Intel Corporation considering the company’s significant near-term and longer term growth prospects with PEG ratio of 1.42. The profit margin of 17.84% is also impressive. However, Intel needs to optimize its debt-burdened balance sheet with significant total debt of $28.89 billion against weaker total cash position of $17.85 billion only, restricting the company to make future growth investments.
Published on Sep 15, 2016
By Subhen Mittra

Copyrighted 2016. Content published with author's permission.

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