The Qualcomm-Intel War Has a Winner

By Paul Ausick Updated Apr 28, 7:23AM EDT · Published Nov 22, 10:10AM EST

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Intel Corp. (NASDAQ: INTC) and Qualcomm Inc. (NASDAQ: QCOM) both held their analyst meetings this week, and it is an interesting comparison because these were likely attended by most of the same analysts at each firm. Now we are getting a comparison and have some expectations and outlook for 2014.

Intel’s new chief executive, Brian Krzanich, addressed the company’s shortcomings in the processor wars for smartphones and tablets. Intel promised a new pragmatism to win its place in the space. It is also looking to design and build semiconductors for the rest of the chip industry as well.

Qualcomm is already way ahead in smartphone and tablet processors, and it unveiled its newest Snapdragon chipsets. CEO Paul Jacobs unveiled the company’s five-year plan and promised to continue returning cash to its shareholders to the tune of 75% of free cash flow this week.

Where does that leave an investor looking for the better value stock for the coming year? Let’s look at where we are starting from.

Intel shares are up more than 22% so far in 2013. The stock closed at $25.23 on Thursday, and the consensus analyst price target of around $24.00 implies that the stock is fully valued, if not overbought. Intel shares rose more than 2.5% on Thursday, leading the Dow Jones Industrial Average to its first close above 16,000 on the strength of the company’s presentation at its analysts’ meeting. Shares have traded in a range of $19.42 to $25.98 over the past year. With a fiscal year 2014 earnings per share estimate of $1.92, it is valued at nearly 13 times next year’s expected earnings. For the fiscal year ending in December, the consensus earnings per share estimate is $1.89. Intel has nearly $20 billion cash and short-term investments.

At Qualcomm’s analysts’ meeting, the company noted that about 40% of smartphone users in developed markets upgrade their phones every year, and in emerging markets Qualcomm is looking at relationships with Asian phone makers to boost its growth. The company has seen its shares rise about 16% so far in 2013. The stock closed at $71.71 on Thursday, and the consensus analyst price target of around $77.20 implies a gain of about 7.7%. Shares have traded in a range of $59.02 to $72.43 over the past year. With a fiscal year 2015 earnings per share estimate of $5.56, it is valued at nearly 13 times next year’s expected earnings. The company’s fiscal year ends in September, and the EPS estimate for the current year is $5.08.

Over the past two years, Qualcomm’s share price has risen by about 29% while Intel’s is up barely 1%. The declining demand for desktop and laptop PCs and the booming demand for chips to drive mobile devices like smartphones and tablets remains a problem for Intel to solve.

Analysts see Qualcomm stock continuing to rise next year while Intel’s stock price is likely to get a boost only from buybacks and dividend hikes. Qualcomm is the clear winner for at least the next year.

About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.