Shares of Intel (INTC, Financial) surged recently due to the company’s overwhelming quarterly report and its raised guidance. Also, the fact that Intel was involved with the new iPhone 7 also makes the stock very attractive at this point. However, there are several other reasons to buy the stock, as described below.
Intel Is Not Dead
Intel moved away from the DRAM market approximately three decades ago, mainly due to the extreme competition, but partnered with Micron (MU, Financial) to develop NAND chips. Due to the partnership, the company began its non-volatile memory business, which produced 4% of its sales in the last quarter.
Moreover, both the companies together have developed new memory technologies such as 3DXpoint and 3D NAND. The company claims that it can offer around 1,000x better performance as compared to the prevailing generation NAND chips.
The company repeatedly detailed the non-volatile memory together with IoT and Data Center, as well as its Programmable Solutions business as a way to expand its revenue further than PCs. However, the enduring decrease in memory prices triggered the revenue generated by the company’s non-volatile memory chip to drop 20% yearly in the previous quarter.
The unit also displayed an operating loss of $224 million. However, this miserable number reflected Micron’s results, but Intel produces a majority of its top-line and operating income from its leading Client Computing and Data Center groups. The loss observed by Intel in the Client Computing sector was moderately offset by the growth in Data Center revenues.
A Major Competitor
Qualcomm (QCOM, Financial) is one of the most significant competitors of Intel. Qualcomm has been manufacturing modems grounded on a more progressive 20 nanometer technology, and its latest modem, the Snapdragon X16, is made with even more progressive and advanced 14 nanometer FinFET technology.
To survive in the industry, it has become mandatory for the companies to implement newer manufacturing technologies to aid enhance power consumption and permit them to comprise more features in the products.
Therefore, it is necessary for Intel to belligerently place its emphasis on enhancements such as optimizing its processor cores to offer considerably higher speeds. On the other hand, the company’s next-generation ultralow-power processor will possibly need to convey both an enhancement in the work amount that the chip can perform per clock, and an additional increment in clock speeds.
Conclusion
Since Intel reported a great quarter, I can expect the stock to continue moving higher in the near future. With the iPhone 7 already in hot demand, there’s no stopping Intel in the long term. Defensive investors can buy Intel for its growth prospects and dividend yield.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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