If you’re the kind of investor who “bets on the jockey, not the horse,” placing bets on CEOs rather than focusing on the companies they run, you are missing out on the opportunity provided by Intel (NASDAQ:INTC) stock.
INTC has not had a full-time CEO since it parted ways with Brian Krzanich in June after he slept with an Intel employee. Since then, Intel’s chief financial officer, Bob Swan, has also been its interim CEO.
Swan insists he’s not a candidate for the permanent CEO role. Some may think he should be.
Under Swan, Intel has settled down to business, and business has been brisk. Its third-quarter report, delivered on Oct. 25, sent Intel stock flying. The chip maker reported net income of $6.4 billion, or $1.38 per share, on revenue of $19.2 billion.
Who needs a jockey when you have a fast horse?
Thank the Cloud
Intel stock rallied after Swan raised the company’s full-year estimates. Intel provided 2018 EPS guidance of $4.53 per share on revenue of $71.2 billion, up $1.7 billion from the guidance it delivered in July.
Intel’s data center group, which makes chips for cloud data centers, generated more year-over-year growth than any other unit. Its quarterly revenue came in at $6.1 billion, up 26% from a year earlier. But Intel’s sales of chips for PCs were also up 16%, and its sales of flash memory were up 21%. Even its Mobileye unit, which makes products for self-driving cars, reported a top line of $496 million, up 6%.
Intel is also benefiting from Apple’s (NASDAQ:AAPL) fight with Qualcomm (NASDAQ:QCOM). INTC is slated to become Apple’s sole supplier of iPhone modems in 2020, when the iPhone is supposed to start utilizing 5G.
That should be a major upgrade because 5G supports much, much-higher speeds than Apple’s current products, and millions of Apple’s customers will probably trade in their phones to get access to 5G.
Despite Intel’s great results, Intel stock is still cheap. The price-earnings ratio of INTC stock is just 17, and INTC stock trades at just three times the company’s sales. It also has a dividend yield of 2.55%. If the company continues to devote 40% of its free cash flow to the dividend, the payout should rise 1.5 cents, to $1.26 per share in 2019. Meanwhile, buybacks have cut the company’s share count by 5% over the last five years.
InvestorPlace’s Luke Lango calls Intel “too attractive to pass up.” Now might be the right time to grab it, he suggests, because Intel stock is almost certain to go higher when INTC names a new CEO.
Intel, however, is still a troubled company. Its main issues involve its chip manufacturing, which is also known as its foundry.
Rival Taiwan Semiconductor Manufacturing (NYSE:TSM) has plans to deliver chips to Advanced Micro Devices (NASDAQ:AMD) with circuit lines just seven nanometers apart next year, while Intel is still at ten nanometers.
Intel is reportedly focusing on four candidates for the permanent CEO role. Two are Qualcomm executives and two are internal candidates. The company is apparently bypassing early favorite Diane Bryant, a veteran Intel executive who briefly helped run Google Cloud for Alphabet (NASDAQ:GOOGL).
If the new CEO can make the foundry great again, that would be enough to boost INTC stock.
The Bottom Line on Intel Stock
Despite running on what looks like autopilot, INTC is outperforming expectations. Intel stock looks cheap, the company is growing, and demand for its products keeps rising.
But a riderless horse is risky. Any real crisis would knock this already troubled company severely off its stride. Nonetheless, it’s really tempting to bet on this horse before its jockey is named.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL.