Categories Analysis, Technology

Intel (INTC) stock looks undervalued on supply concerns

Intel Corporation (NASDAQ: INTC) stock remained under pressure due to supply shortages concern. The shares have fallen over 15% since reaching a 19-year high of $69.29 on January 24, 2020. The stock has declined over 7% in the year so far and has been considered as undervalued despite attractive growth prospects in the long-term.

The technology industry continues to be hard hit by the coronavirus outbreak as the Mobile World Congress conference was among the first to cancel followed by the IDC Directions conference. Facebook (NASDAQ: FB) canceled the F8 developers’ conference in San Jose and a marketing conference in Moscone.

Intel also canceled the Intel Labs Day event, which was supposed to show off emerging computing technologies. Along with this, Intel’s supply shortages are encouraging clients to head for Advanced Micro Devices (NYSE: AMD). The concerns are mounting for Intel that could impact the stock in the near-term.

Intel’s client and data center business are undervalued as the transition to 7-nanometer, 5G, and the broader adoption of the data center are likely to take more time than needed. The loss of modem business, which is a major near-term concern, could lower Intel’s revenue by about $3 billion.

The sale of 5G modem business to Apple (NASDAQ: AAPL) has lessened Intel’s market share. The sale was considered to be the company’s exit from the 5G world but Intel announced a complete portfolio of 5G network infrastructure including 5G-optimized Ethernet adapter. 5G adoption is expected to accelerate Intel’s revenue growth in the future.

In the long-term, the company could be beneficial backed by 5G network infrastructure, data-centric, and Internet of Things (IoT) as well as Mobileye autonomous driving and robotaxis. The company is on track to deliver its first 7-nanometer-based product, a discrete GPU, at the end of 2021. Intel looks for acquisitions that leverage and strengthen its capital and R&D investments.

Read: Palo Alto Networks Q2 earnings review

Intel expects to reach $85 billion of revenue by 2022-23 with networking infrastructure that could be accelerating at a faster pace backed by Snow Ridge. The company’s momentum would continue beyond 2021 as 80% of the network will be virtualized by 2024 and 5G transition could pave way for a bigger growth opportunity in the future.

The stock opened higher and is trading in the green territory in the mid-afternoon on Monday. The shares have been trading between $42.86 and $69.29 in the past 52 weeks. The 52-week change of 2.93% was lower than the S&P 500 yearly change of 5.78%.

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