Despite a soft start to the previous fiscal year, Intel (INTC, Financial) finished the year on a strong note, which is evident in the recently released fourth quarter results. Its revenue grew 6% for the full year, along with a strong growth of 25% in operating income. The company’s focus on market conditions and the in-depth focus on innovations has been its strength, and it further believes that these initiatives will be growth drivers for it in the current fiscal year as well.
Focused on driving growth in PCs
Intel is largely focused on bringing back the lost momentum to the PC business. It is undertaking new strategies to reinvent the computer experience and is making innovations in every segment. This is expected to contribute well to Intel’s growth strategy. In fact Intel’s efforts in this regard are evident in the form most energy efficient notebooks, 2-in-1s, ultrabooks, Chromebooks and PCs which are continually gaining traction in the market.
Moving on, Intel has high expectations for the growth in Data Center Groups. Seeing this growth, Intel is looking forward to capitalizing on this growth as well as growth in the Cloud segment and big data by diversifying customer segments and product leaderships. In addition, Intel is also seeing good opportunities in the mobile business.
New areas to propel growth
The mobile business had been struggling in the past but the ramp up in the shipping of its second generation LTE base their 7260 has helped it come back on track. This ramp up is reducing the building material cost which was impacting majorly on the gross margins. Moreover, Intel has also entered in to some agreements with Rockchip and Spreadtrum which are expected to benefit the company further in its journey.
Intel is also having its eyes on the IT segment. The growth in the IT is contributing well to the company, helping it to grow its adjacent businesses. The internet of things market also appears to be on a good run and in fact Intel is also seeing good growth in it. It has reported a 12% growth in the segment in the last year and is expected to further grow in the upcoming quarters. To add more value to its growth in the IT, Intel has recently launched RealSense 3D camera technology which is also gaining good traction in the market.
Intel isn’t showing any signs of stopping here as in the wearable device market, Intel is incorporating its growing portfolio with some well-known names in the market such as Google Glass, fashion and fitness brands such as Fossil, Oakley, Opening ceremony and SMS audio. This is expected to further add value to Intel’s product portfolio. Seeing this, Intel is focusing on bringing in broader range of devices in the emerging markets as it is optimistic about the market trends in 2015.
Conclusion
With a trailing P/E of 17.23 the stock looks reasonable, while the forward P/E of 15.27 shows good earnings growth in the near term. But the stock doesn’t look like a strong long term holding as its earnings are growing at a CAGR of just 8.98% which is lower than the industry average of 19.26%. So I would like to suggest that the short term investors can definitely pick Intel as of now but for the long term the investors should look for other stocks with strong valuation and long-term prospects.
