Is Intel One of the Top Stocks to Buy?

Despite a recent stock price pop driven by acquisition rumors, Intel's share price is down more than 13% year to date. There are several reasons cited for Intel's poor performance in 2015, and some of them actually warrant investors' concerns. It's no secret that Intel still relies on the PC market to drive revenue -- the division accounted for 62% of its total sales last year -- and there's no escaping the fact that PC growth is stagnant at best.

Add Intel's recently lowered guidance for fiscal 2015's Q1, and Intel naysayers have a lot to hang their hats on. But before investors dismiss Intel as worthy of inclusion on a list of top stocks to buy, there are a few other factors worthy of consideration. CEO Brian Krzanich's plans for Intel's future are gathering steam, and the markets it intends to dominate going forward are poised for outstanding growth. For investors with a long-term perspective, Intel offers an intriguing opportunity.

First, the bad newsIt's rarely a good thing when a company lowers its revenue guidance, regardless of the circumstances. That was certainly the case when Intel adjusted its Q1 forecast downward a couple of weeks ago.

And it wasn't just that Intel lowered expectations, it was the magnitude of the revision. Rather than the $13.7 billion of revenue, give or take, that Intel had previously expected in 2015's first quarter, it's now forecasting about $12.8 billion. A $900 million difference? Ouch.

The problems Intel cited primarily revolve around softness in the aforementioned PC market. As Intel described it, "weaker than expected demand for business desktop PCs," inventory levels, and fewer Microsoft Windows XP refreshes by small and medium-sized businesses will put pressure on Q1 results.

Microsoft's stock price is also down year to date, to the tune of 12%, for many of the same reasons Intel shareholders have been feeling the strain. Also similar to Microsoft, analysts and industry pundits are becoming antsy waiting for Krzanich's planned strategic changes at Intel to take hold. When Krzanich said his objective was to lead Intel "into the next era," he was referring to mobile, cloud, and Internet of Things (IoT) technologies. And it's because of those areas that Intel becomes an opportunity for patient investors.

Now, for the good newsMany analysts and industry pundits have focused on the paltry 3% improvement in Intel's PC group revenue in the fourth quarter of 2014 compared to the year prior, along with its weak mobile performance. But digging a bit deeper, there are several bright spots in Intel's Q4 and fiscal 2014 performance, particularly as it relates to Intel's future.

Perhaps the brightest of the bright spots last quarter was the continued strides Intel's data center group is making. The $4.1 billion in Q4 data center revenue was a whopping 25% jump compared to 2013. Just as importantly for investors willing and able to take a long-term view of Intel's growth potential, data center sales account for an increasingly significant piece of Intel's overall revenue pie.

In 2013's fourth quarter, data center sales made up 25% of Intel's total revenue. This past quarter, Intel's data center unit totaled 32% of sales. What makes this unit's stellar performance so critical is that it's due to Intel's emphasis on cloud solutions. According to recent research, the driving force behind the rapidly expanding server market is "hyperscale" data centers that collect and collate the reams of data collected in the cloud -- and Intel is leading the way. Gartner predicts data centers will drive $143 billion in sales this year, and that figure isn't likely to decline going forward.

Another area of strength for Intel last quarter was also one of Krzanich's "next-era" efforts: IoT. Intel grew its IoT unit 12% sequentially, and 10% compared to 2013's Q4 as it, too, continues to make up a more significant portion of total revenue with each passing quarter. Mobile remains Intel's Achilles' heel, though it did top its own estimates by shipping 46 million tablets in 2014, and upgraded mobile-ready chips are on the horizon.

Don't expect Intel to miraculously burst out of its meandering stock price range. However, Intel is laying the foundation for success by focusing on next year's technologies, not last year's PC market, and that bodes well for the future. Intel also recently confirmed it will maintain its $0.24 quarterly dividend, which equals an industry-leading 3% yield.

Intel won't appease day traders and short-term profit seekers, but for the patient investor, it should make the list of top stocks to buy in 2015.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Gartner and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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