Stock pick: Intel Corp. (INTC) has inside track as tech spending rebounds

PC and data-centre business is growing

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Chart showing trailing 12-month stock performance for Intel Corp.

While hot tech stocks like Twitter, Facebook and Apple may capture most people’s attention, every now and again an old stalwart makes news.

On July 16, venerable chipmaker Intel Corp. announced that its second quarter revenues were up by $1 billion, or 8%, over the same time last year.

Earnings per share came in it at $0.55, up 41% from Q2 2013 and higher than analyst estimates of $0.52 per share. Operating income, net income and gross margins all saw gains too.

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Suji De Silva, an analyst with Topeka Capital Markets, has been a fan of Intel for a while. On July 17, he — along with several other companies — upgraded his price target by nearly 12% from $34 to $38 on the good results.

He points out that a number of divisions saw growth, inclduing its PC and data centre segments. They grew, he writes, thanks to “healthy demand and relatively stable pricing.”

De Silva is bullish on Intel’s PC division and thinks that could help drive more growth in the future. “(We) expect the current enterprise refresh cycle to last several quarters,” he writes. “PC manufacturers are demonstrating greater optimism versus prior years, and building for back-to-school seasonal demand.”

He’s also encouraged by its data division growth and the continued demand for cloud computing services.

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Perhaps most importantly to shareholders, the company has announced that it will add $20 billion to its share buyback program and it plans to repurchase about $4 billion of shares in the next quarter.

The stock is currently trading at $33 a share, but analyst price targets range between $35 and $52. On July 17, UBS and B Riley both upgraded their outlook to a buy and put $37.5 and $40 targets, respectively, on the stock.

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