Intel Stock Starts Countdown to Launch

NEW YORK ( TheStreet) -- Intel ( INTC) has been trailing the semiconductor industry for the past year, experiencing hard times even in this good market.

Revenue and earnings haven't been disappointing but have been in line with analysts' expectations. They feel that the stock price is depressed and if they are right, investors coming in at this level could see an annual total return in the 19%-to-21% range over the next five years.

Let's look at how depressed the stock really is.

During the past year while the stock was down 21% the market as measured by the Value Line Arithmetic Index was up a solid 15% as this graph provided by Barchart shows:

Fundamental factors: Intel is huge with a market cap of $105 billion. The price-to-earnings ratio is a reasonable 9.88 and the dividend yield of 4.24% is about 45% of projected earnings. This year revenue is expected to be up 1.40% and up again next year by 4.50%.

Earnings are estimated to be down 8.90% this year due to heavy research and development expenses but up again by 8.20% next year, possibly continuing to improve for the next five years at an annual rate of 12.33%. The financial strength is A++ and TheStreet considers this a B- stock.

Technical factors: Due to the downward momentum the stock gets a 67% technical sell indicator from Barchart but recently the Trend Spotter has issued a hold signal.

The stock is trading above its 20- and 50-day moving averages but still below its 100-day moving average. The price was down 3.30% for the month and 20.40% for the year. The relative strength index was a neutral 49.89 and Barchart computes a technical support level at 20.97.

The stock recently traded at 21.15 slightly above its 50-day moving average of 21.05.

Investor sentiment: Sentiment is getting stronger with both the professional and individual investor. Thirty-seven Wall Street brokerage firms have assigned 49 analysts to predict the numbers and they gave six strong buy, 10 buy, 25 hold, seven under perform and just one sell recommendation to clients.

This is a widely followed stock on Motley Fool where 9,902 individual investors voted 94% for the stock to beat the market. Short interest has begun to get covered and decreased from about 220 million shares in November to 197 million shares recently.

Peer comparisons: While INTC was down 20% for the year, Taiwan Semiconductor ( TSM) was up 31%, Analog Devices ( ADI) was up 17% and Texas Instrument ( TXN) was up 1%.

Taiwan Semiconductor is expected to have increased revenue this year of 15% and next year by 15.80%. Earnings are predicted to compound annually by 15% for the next five years. The P/E is 16.89 with a 2.16% dividend yield. The financial strength is B++ and TheStreet rates it an A+ stock.

Analog Devices is projected to increase revenue only 0.4% this year and 9.70% next year while earnings are estimated to increase annually by 3.27% over the next five years. The P/E is 21.72 with a dividend yield of 2.59%. The financial strength is A+ and The Street rates it an A- stock.

Texas Instruments is predicted to have a loss of revenue of 6.40% this year but increase again by 6.60% next year. Earnings forecasts are good at an increase of 4.9% this year, 23.3% next year and to increase annually by 9% for the next five years. The P/E of 20.56 is coupled with a 2.49% dividend yield. The solid A++ financial strength gets the stock a B+ rating by TheStreet.

Conclusion: If the economy recovers and the company's R&D investments pay off, Intel investors could reap a 19%-to-21% total annual return. This may be the right entry point but I'd follow the moving averages and turtle channels to see if the momentum holds up:

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.