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Can Intel’s share price outperform AMD and Nvidia?

Intel Corporation’s [INTC] share price has fallen disproportionately when compared to its competitors Advanced Micro Devices [AMD] and Nvidia [NVDA] so far this year, with the chip-maker dropping by nearly 2% up to 7 June, whereas AMD gained more than 75% and Nvidia nearly 9% during the same period.

Intel’s initial inability to launch its new 10nm chip on time, slowing growth in China, and a cautious outlook for 2019 from CEO Bob Swan, has seemingly rocked investors, especially as AMD increasingly encroaches on its space with its competing products.

As a result, Intel shares' forward P/E ratio is at a six-year low at 10.38, compared to AMD’s 34.03 and Nvidia’s 20.99. It does however suggest that Intel has room to run.Intel 1-year share price performance, CMC Markets, 11 June 2019

 

Writing on Seeking Alpha, Kwan-Chen Ma suggests that even with the competition considered, Intel is undervalued both from a revenue perspective and an earnings perspective. He believes that Intel is worth more than its current 10x forward P/E and goes on to say that while Intel’s shares have been beaten down disproportionally by macro headwinds, the business could ultimately lose market share as a result.

 

Intel goes head-to-head with competitors AMD and Nvidia 

In a show of confidence, Intel challenged AMD to go head-to-head with the company in the ‘real world gaming’ sector at this year’s Computex conference that ended on 1 June.

“One of the things we’ve learned over the years is that a great PC experience means different things to different people, from gamers to content creators to office workers,” Gregory Bryant, senior vice president at Intel, told Forbes. “Understanding what real world experience will be most meaningful to these very diverse audiences – and then bringing that precise experience to life – requires a much deeper level of innovation.”

“Understanding what real world experience will be most meaningful to these very diverse audiences – and then bringing that precise experience to life – requires a much deeper level of innovation” - Gregory Bryant, senior vice president at Intel

Intel is suggesting it believes that it can remain competitive and innovative enough to outpace its competition. But can it convince investors?

InvestorPlace’s James Brumley thinks so, arguing that investors could benefit from the company if they are willing to wait long term.

“Investors may want to take a closer, thoughtful look at the three-year roadmap Intel laid out earlier this month,” Brumley wrote on InvestorPlace. “Adhering to its plan will be challenging to be sure, but it’s not out of reach. It could even prove catalytic. After all, INTC stock is only priced 10 times its trailing earnings, and less than 10 times its projected income.”

Still, AMD will prove a hurdle to Intel with the potential threat it poses to market share. At the Computex conference in May, the chip-maker launched a microprocessor chip which challenges Intel’s core i9 chip on cost, performance and power levels. Furthermore, the company looks set for sales growth in Q2 and Q3 of 2019, posing some serious competition to the 50-year old legacy company.

 

Market cap$208.58bn
PE ratio (TTM)10.52
EPS (TTM)4.43
Operating Margin (TTM)32.39%

Intel share price vitals, Yahoo finance, 11 June 2019

 

On Intel’s first analyst day in more than two years, BMO Capital Markets analyst Ambrish Srivastava said: “AMD is having an impact on the business, and it has barely begun shipping its server products, and will likely have a bigger impact than clearly we thought on Intel’s margin structure – and likely what Intel thought as well.”

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