If you’re looking for cheap chip stocks, Intel stock might be worth a look.
Over the past few years, Intel has struggled with some issues. In particular, the eternal competitor Advanced Micro Devices has gained significant market share. It is true that Intel is still the dominant processor manufacturer in the field of PCs and servers. But in the smartphone market, for example, you never got your foot in the door. Several attempts to gain market share in the huge market have failed over the years.
Fortunately, the markets where Intel is dominant are huge and still growing. Therefore, the eroding market shares currently only mean that the Californian giant is growing slower than the competition. This is because the market as a whole has grown strongly in recent years. Especially in the area of server products, sales have virtually exploded and here Intel is still the dominant supplier.
In the first half of the year, however, Intel was no longer able to increase sales. However, apart from the strong competition, this is certainly also due to the fact that last year’s result was very strong. Overall, sales fell by just under 1% to $39.3 billion. Profit plunged nearly a quarter to $8.4 billion, or $2.06 per share, because of high restructuring costs. All in all, the numbers still look very good.
However, the stock market is apparently still sceptical about the future prospects of the Group. Right now, Intel stock is paying well less than 20 times last year’s earnings. The reason for this, however, is quite simple: the concern that Intel could continue to lose market share and that this will sooner or later be reflected in falling profits is very great. However, if Intel manages to convince the stock market that the company is far from being written off, the stock could still stage a massive rally.
For more updates, follow us on Twitter:@JRC_Capital
