Tuesday, January 18, 2011

Intel Looks Like A Value Play

I was reading through Intel’s earnings report and was pleasantly pleased with the company’s results. Everything was great in the report except for the stock movement. The fact that Intel only trades at $21 may represent a great buying opportunity for long term investors.

Intel’s revenue increased 8 percent to $11.5 billion. The company had earnings of 59 cents per share. Intel’s results were great across the board. The company’s gross margins were high coming in at 67.5%. Intel was even more optimistic about next year’s earnings with the company expecting revenue of 11.5 billion dollars next quarter.

The company is forecasting record earnings next year as well. The CEO is predicting that the stock will have its best year in history. That’s saying something after a quarter in which the company had a phenomenal earnings report with net income up 48%
Intel still has a tremendous balance sheet with over $16 billion dollars in cash and just $2.5 billion dollars in debt. Intel looks like a value play at its $21 price with its large amount of free cash flow and double digit earnings growth rate. Add in the McAfee acquisition and there is no reason why Intel cannot continue to thrive.

The stock currently has a 3 % dividend yield with a lot of room to rise. Shares look like a bargain with the stock trading at just 10 times earnings.]

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