The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Intel Stock Prediction

Summary:

The rumors proved true. Intel indeed got its XMM LTE modem inside some iPhone 7 models.

As a result of this, Intel’s stock is trading at all-time high.

Apple’s leadership in high-end smartphones will boost Intel’s mobile division.

I expect Apple to also source out other iPhone components from Intel. Aside from modems, Intel could supply NAND flash storage for future iPhones.

Intel could also help Apple come up with better machine-learning iPhones. Intel’s RealSense camera technology and Movidius’ visual processors are ideal for self-learning iPhones.

Congratulations to the people who heeded my Buy recommendation for Intel (INTC) last month. Intel’s stock posted its new 10-year high price of $38.05 last Friday. This significant achievement was after a teardown of an iPhone 7 model contained an Intel-made XMM LTE modem. I already made the same conclusion last September 9 after reading the technical specifications of iPhone 7 models posted at Apple’s official website.

Those who bought INTC last August 26 would love the +7.4% gain. I expect Intel’s stock to go higher this week. The iPhone 7 design win is going to inspire institutional investors to add more INTC shares to their portfolios. Apple is Intel’s ticket to becoming relevant in the smartphone industry. Intel even raised its 3Q revenue forecast allegedly due to better PC market. However, the LTE modem business from Apple definitely helped Intel during the third quarter of this year too.

(Source: Google Finance)

Why INTC is Soaring

The stock market rallied around Intel because of the iPhone 7 design win. Apple’s iPhone 7 is definitely going to improve Intel’s mobile chip division’s annual revenue and operating profits. Unlike before when Intel had to subsidize or even give away free 3G/4G modems (so that Chinese phone vendors will use its Atom phone/tablet mobile processors), Apple is most likely buying XMM LTE modems at prices that are beneficial to Intel’s bottom line.

I dismiss any suggestion that Intel did a contra revenue tactic to win this deal. Apple sells iPhone 7 at more than $630 per unit. Apple could easily afford to pay reasonable prices for Intel’s LTE modems. I also suspect that Apple dual-sourced the iPhone 7’s modem requirements on a 50/50 split between Intel and Qualcomm (QCOM). I expect the iPhone 7 and iPhone 7 Plus to sell 120 million units per year.

At $15-$20 per modem/baseband processor, Intel’s new potential revenue from Apple is $900 million/year.

Supplying More Than Just Modems

I predict that Apple could also source out other iPhone components from Intel. Let us never forget that Intel is also a seasoned supplier of NAND flash storage for desktop computers and data centers. While the iPhone 7 is still using NAND flash from SK Hynix, I expect Intel to eventually come up with mobile versions of its desktop 3D NAND flash storage.

Intel’s partner in 3D XPoint flash, Micron (MU), has already released a 3D NAND storage solution for next-generation mobile devices. I expect Intel to also equal this feat pretty soon. Apple has vastly improved the photography and videography utilization of the iPhone 7. Next versions of the iPhone will therefore need larger capacity and faster flash storage solutions to help people save their file-hungry 4K videos and RAW images.

Intel and Micron’s Xpoint is the future of storage for mobile devices. Smartphone vendors like Apple will eventually have to shift to 3D XPoint to better position smartphones as the next iteration of personal computers.

(Source: Micron)

Another possible future design win for Intel in the next iPhone models is through the camera system. Apple is very interested in Augmented Reality and Intel’s RealSense 3D camera could help Apple accelerate its plans in phone-based Augmented Reality. Intel’s Project Alloy headset already proved that the RealSense 3D technology is ideal for Augmented Reality and Virtual Reality.

Lastly, Apple is also very keen on developing machine-learning iPhones. The iPhone 7 is already a machine learning tool that tries to help users get better photographs. However, Intel’s recent purchase of Movidius could also be an early preparation when smartphones like the iPhone will need true machine-learning vision processors

Movidius touts that its Myriad 2 is the best Vision Processing Unit that will help devices like the iPhone get deep learning vision. The voice-based Siri artificial intelligence platform of Apple will eventually have to be augmented with visual-based AI to help keep the iPhone competitive in the next decade.

(Source: Movidius)

Conclusion

Supplying more iPhone components is Intel’s ultimate goal. Intel has cutting-edge products that Apple needs to make its iPhone more competitive against Samsung’s (SSNLF) Galaxy phones. The 3D XPoint non-volatile memory technology, Movidius visual compute processors, and RealSense camera assets of Intel are future candidates for inclusion in next-gen iPhone models.

It is tempting to sell INTC now but I advise you to do no profit-taking this week. Institutional investors and hedge fund managers will likely push the stock higher during the next few weeks. It is best to wait for a higher exit point to maximize your profit. If you have the fund, I even encourage you to buy more INTC shares while it still trades below $38.

Near-term algorithmic forecasts from I Know First rate INTC as neutral. However, gut feeling is telling me that Intel’s stock has more upside potential during the next few months.

Past I Know First Forecast Successes with Intel Corporation

I Know First has been bullish on INTC in past forecasts. Since then, INTC has been up almost 8% to date.

This forecast was sent out to I Know First subscribers on August 26th 2016. To subscribe now click here.