Intel: Strong Tailwind from New Microsoft Requirement

I am is bullish on Intel (INTC). This highly profitable company’s stock trades at a 12.1x forward P/E.

Intel is still the dominant leader in x86 consumer and server processors. It touts 90.5% market share in x86 server processors, and 77.5% of the total x86 processors sold in Q2 2021.

INTC is currently trading at a 22.1% discount from its 52-week high of $68.49. (See Intel stock charts on TipRanks)

Big Boost from Windows 11

As the dominant vendor of x86 processors, Intel benefits a lot from Microsoft’s official confirmation that Windows 11 requires Trusted Platform Technology, or TPM 2.0.

This policy also applies to Windows 11 installed on virtualization software made by VMware (VMW), Citrix (CTXS), and Oracle (ORCL).

Sales of laptops, desktop PCs, and workstations still account for 54.5% of Intel’s $18.5 billion quarterly revenue. Microsoft’s TPM 2.0 requirement for Windows 11 could probably add $2 billion to $4 billion in Intel’s upcoming Q3 and Q4.

Most people do not how to enable TPM 2.0 on their current computers’ motherboard. It is hard to find TPM 2.0-compliant motherboards and x86 processors on older laptops and desktop PCs.

TPM 1.2 was the prevalent chip embedded on a majority of recent computer motherboards and processors.  

Just Buy New Computers

There are now 1 billion Windows 10 users. Many of them probably want the upcoming October 5 free upgrade to Windows 11.

The easy thing to do for loyal Windows PC users would be to buy new TPM 2.0-compliant computer products, as software updates cannot not make TPM 1.2 hardware-equipped computers become TPM 2.0-qualified.

Windows 11 offers improved performance, hardened hardware-based security, integrated Android apps, and better touchscreen support.    

Invest While INTC is Cheap

Intel is still the No. 1 semiconductor vendor. Its 15.6% market share is not reflected in INTC’s valuation ratios.

Source: Motek Moyen

Intel touts 27 years of increasing dividend payments, while Advanced Micro Devices (AMD) has never paid dividends to its shareholders. Nvidia (NVDA) only started giving small dividend payments in 2014.

Safe Long-Term Investment

Intel’s stock boasts a Piotroski F score of 8. It is therefore considered a strong value stock. This company’s total cash position is $24.9 billion. Net operating cash flow is $32.4 billion.

Intel’s short-term assets of $49.4 billion exceed its short-term liabilities of $42.8 billion.

Wall Street’s Take

The consensus among Wall Street analysts is that Intel is a Hold. This is based on nine Buys, 10 Holds, and seven Sells. The average INTC price target is $61.14, implying 15.1% upside potential.

Conclusion

Relative undervaluation, generous dividend payments, robust financial health, and dominant x86 processor leadership are reasons to be optimistic regarding Intel.

Disclosure: At the time of publication, Motek Moyen did not have a position in any of the securities mentioned in this article.

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