Intel Well-Positioned to Accelerate Growth
We are modestly increasing our fair value estimate to $36 after better than expected third-quarter results.
Intel (INTC) reported better-than-expected third-quarter results, thanks to broad-based strength across its data-centric (non-PC) segments. During the quarter, the firm also closed its Mobileye acquisition that we foresee kick-starting Intel’s prospects in advanced driver assistance systems, or ADAS, and autonomous driving. Albeit an expensive purchase at $15.3 billion, Mobileye is a high-growth business that has already won 14 ADAS designs across 14 automakers this year. Meanwhile, Intel’s endeavors in artificial intelligence, or AI, remain a scattershot strategy, with accelerator chips in the data center, car, and at the edge (device-level). With the AI-related semiconductor opportunity still in its infant stage, we foresee considerable growth opportunities for Intel as it becomes less reliant on traditional PC and server CPU end-markets. Management upped its full-year guidance, partially bolstered by the inclusion of Mobileye, and we are modestly increasing our fair value estimate to $36 per share from $34 per share. Nevertheless, current levels appear frothy for this wide-moat chipmaker, and we suggest prospective investors wait for a more attractive entry point.
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Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.