Is Intel Corporation a Buy?

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With the company's stock up 11% since it announced another record-breaking quarter, some may think Intel (NASDAQ: INTC) is no longer a buy. Bullish investors like myself have long sung the Intel tune despite its relatively sluggish performance prior to its recent run-up.

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Of the 40 Intel analysts, a majority of them -- 24 to be precise -- give Intel either a strong buy or overweight rating -- which is quite a departure from a year ago. There are still bearish pundits who suggest that next year, Intel will experience little to no growth. So, who's right, the Intel bulls or the naysayers?

Baby steps in the right direction

One of the things holding Intel back until September of this year was the perception it remained overly reliant on the "dying" PC market. But more and more industry analysts suggest the PC market is actually stabilizing, which Intel has demonstrated the last several quarters.

After several quarters of growth, Intel's PC unit generated $8.9 billion in revenue in the most recent one, flat compared to a year ago. Thing is, that's not a negative in that CEO Brian Krzanich has Intel laser-focused on fast-growing markets including the Internet of Things (IoT), cloud data centers, artificial intelligence (AI), memory solutions, and virtual reality (VR).

The PC results didn't prevent Intel from posting a 6% jump in total third-quarter revenue to $16.1 billion thanks to growth where it counts: Intel's key core units. Data center sales rose 7% to $4.9 billion and were up 15% when components of other divisions sold into cloud data centers are included. Programmable solution revenue -- an element of Intel's IoT offerings -- increased 10% to $469 million.

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Intel's real high flyers continue to be IoT and memory solutions, and they are becoming a bigger piece of total revenue with each passing quarter. Memory sales soared 37% to $891 million to become Intel's third-largest division, followed closely by a 23% pop in IoT revenue to $849 million.

I'll take that, thank you

Not surprisingly, competition in the up-and-coming IoT, AI, and cloud data center markets is growing. One of Intel's biggest challengers is NVIDIA (NASDAQ: NVDA), particularly in AI-driven data centers and smart cars. NVIDIA's share price has doubled this year, and after another stellar quarter it's easy to see why.

NIVIDIA once again reported record revenue, up 32% to $2.64 billion due in no small part to another quarter of strong data center results. And with the introduction of its new TensorRT platform, NVIDIA expects its AI data center offerings to gain more traction in the months ahead. But with all that, NVIDIA is still a comparative upstart, though you can bet Intel is peeking over its shoulder.

The rest of the story

Another initiative of Krzanich is cutting overhead, which Intel did again last quarter. The $4.9 billion in operating expenses in the third quarter was a 10.5% drop from a year ago. Becoming a more efficiently run company, along with Intel's revenue growth, led to record operating income and earnings per share (EPS). Operating income rose 15% to $5.1 billion, and EPS of $0.94 was a jaw-dropping 36% improvement.

Yet with its strong results, delivering where it counts, and a stock price bumping up against its 52-week high, Intel remains incredibly inexpensive relative to its peers. Intel stock is trading at 16 times trailing earnings, considerably below the peer average of 26.3. By virtually every other metric, Intel is a screaming bargain, despite climbing nearly 30% in value the last three months.

The envelope please

As you may have gathered, not only do I remain bullish on Intel, investors are beginning to see the light as well. The even better news is that this only the tip of the iceberg for Intel. Toss in a 2.4% dividend yield, and Intel isn't just a buy, it's a steal.

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Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.