Intel Updates: Expands Semi Leadership, $29 Fair Value
Source: Google Finance
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Intel’s (NASDAQ:INTC) stock has gyrated the last couple of weeks with broader market sentiment and then slipped by about 5% in the last few days as the company lowered its Q4 outlook primarily based on supply issues (See article Intel Drops On Supply Issues, Fundamental Drivers Are Main Concern). These issues apply to semiconductor industry in general and to companies such as AMD (NYSE:AMD) and Nvidia (NASDAQ:NVDA). Nevertheless there were some positive developments for Intel as well, and we do not believe these supply issues change the fundamental outlook for Intel.
See our full analysis for Intel
Intel expanded its lead over Samsung in overall semiconductor market in 2011. The company has demonstrated tremendous revenue growth this year and as a result, gained share in the global semiconductor market by selling almost $50 billion worth of semiconductor products. [1]
Furthermore, there were couple of developments for Intel’s mobile business. The smartphones using Intel’s Atom processor will hit the Indian market in 2012. [2] India’s economy is characterized by rising middle class and healthy GDP growth and should be one of the key markets for smartphones in years to come. Additionally, Intel has stated that it has re-organized its mobile business in order to better focus on tapping the fast growing mobile opportunity. [3] The new business unit will be termed as Mobile and Communications Group.
In the near term, the positive catalysts for Intel could be the introduction of Windows 8, potentially greater success with Atom, and the introduction of Ultrabooks. On the other hand, the negative catalysts could be ARM’s entry into PC market and further cannibalization of PCs by tablets.
Our price estimate of $29 for Intel implies a premium of more than 20% to the market price.
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Notes:- Intel Grows Semiconductor Lead Over Samsung: IHS iSuppli, eWeek, Dec 12 2011 [↩]
- Intel Atom-powered smartphones to debut in 2012, The Times Of India, Dec 2 2011 [↩]
- Intel Reorganizes Mobile Business to Speed and Improve Development, PCWorld, Dec 15 2011 [↩]