23 November 2015 at 14:00 GMT
- Data centre business looks very promising
- Core PC segment seen improving in 2016
- Attractions include high ROIC and low valuation
By Peter Garnry
Intel remains one of our top alpha picks in the mega cap segment. Last week, the shares were the best performing in the segment up 8% w/w. After being down as much as 27% by late August the rally since has pushed the year-to-date performance back up to only -2%
The stock remains a top alpha pick driven by still high ROIC (~19%) and very low valuation (EV/EBITDA 6.9x). Investor sentiment has recently changed as a positive future story about 15% expected long-term growth in its data centre business in addition to a more positive outlook for the core PC segment in 2016.
Intel weekly share price since 2011
Source: Saxo Bank. Create your own charts with SaxoTrader click here to learn more
Despite the recent rally, the shares have more upside as the growth story in data centers stimulates more positive investor sentiment as we move into 2016. Assuming 4.5% revenue growth in 2016 (consensus estimates) and expanding margins the valuation should be much higher.
– Edited by Clare MacCarthy
Peter Garnry is head of equity strategy at Saxo Bank