Markets forgot about the competitive pressures from AMD (NASDAQ:AMD) and weak quarterly results from Intel (NASDAQ:INTC) in the last quarter that Intel appears set to make new highs this year. The favorable valuations alone do not explain why the stock is on an uptrend. Should investors chase the stock at these levels?
Intel’s stock is inexpensive at around 12 times earnings. Conversely, AMD stock trades at a forward P/E of more than twice that of Intel’s 11 times P/E.
Intel has plenty to offer for investors. The core PC chip business is not a fast-growing unit but it still brings profits to the company. Consumers and businesses still have to upgrade hardware every few years, so Intel will still offer high returns for shareholders despite the competition from AMD.
HP Inc. (NYSE:HPQ) reported poor PC sales but this did not hurt Intel stock. This suggests that investors value the company’s 5G modem chip business, the Altera unit (which builds programmable chips), and Mobileye. The growth in technology use in automobiles helps Mobileye’s business grow. Even though Intel is not an income play, with a modest dividend in the 2.3% range, its diverse business will cushion it from the slow and competitive PC market.
