20% Upside For Intel Stock?

Despite more than a 20% rise since the March lows of this year, at the current price of around $54 per share, we believe Intel stock (NASDAQ: INTC) is still a good opportunity for investors. INTC stock has increased from $44 to $54 off the recent bottom, less than the S&P which increased by 56% from its lows. However, the stock is down around 10% from the level it was at the start of the year, and has not yet touched its pre-Covid (February 2020) high of $67. We believe that Intel’s stock could set fresh highs, rising more than 20% from its current level, driven by expectations of rising demand and strong Q2 2020 results. Our dashboard What Factors Drove 20% Change In Intel Stock Between 2018 And Now? has the underlying numbers behind our thinking.

The stock price rise since 2018 year-end came despite an unchanged net income, as the rise in revenue was canceled out by an equal drop in net margins. However, a 4% drop in the outstanding share count meant that earnings on a per share basis also rose 4% from $4.57 in 2018 to $4.77 in 2019.

Intel’s P/E multiple rose from 10x at the end of 2018 to 12x by the end of 2019, but has since dropped to around 11x. We believe that the company’s P/E ratio has the potential to see a further increase in the near term on expectations of continuing demand growth and favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns in early 2020 have led to a rise in demand for computing devices as more and more people are working from home, and there has also been a rise in online business activity. This means more and more laptop and computer sales, and thus higher demand for Intel’s chipsets. This is evident from Intel’s strong Q2 earnings, with revenue at $19.7 billion vs $16.5 billion for the same period in 2019, a 19% jump. A drop in R&D and SG&A expenses, meant that EPS rose to $1.20 from $0.94 in the same period last year. We expect demand for Intel’s chipsets to stay strong in the near-term, as computing device demand remains high.

These factors will raise investor expectations further, driving up the company’s P/E multiple. We believe that Intel’s stock can rise a further 20% from current levels, to regain its 2020 high of $67.

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