Intel: Is Now the Time to Be Brave?

Key Points

• Intel shares are continuing to consolidate after a tough year.
• Last week’s earnings report suggests the ship might be turning. 
• Some analysts are calling up 20% upside from current levels. 

Intel Corp NASDAQ: INTC has endured a tough year, with its stock losing as much as nearly 65% due to red-hot competition and declining earnings. However, in recent weeks, the stock has been consolidating and has even started to show signs of rally potential. 

Santa Clara-based Intel, a semiconductor giant valued at around $100 billion, has struggled against rivals like NVIDIA Corp NASDAQ: NVDA and Advanced Micro Devices, Inc. NASDAQ: AMD, who have staked out strong claims to much of the market. However, since hitting lows in September, Intel shares have climbed 25%, and there are several reasons for investors to be excited. Let’s jump in and take a look.

Intel's Fundamental Performance

Starting with fundamentals, Intel’s Q3 results came as a welcome surprise. Despite the company posting a bigger-than-expected loss of $0.46 per share, revenue came in higher than expected. It also helped that Intel’s forward guidance was on the high side, a forward-looking factor that will almost always help make up for any shortfall in a past quarter. 

Intel’s leadership also struck a decidedly upbeat tone, with CEO Pat Gelsinger emphasizing the company’s $10 billion cost-reduction plan. In his call with analysts, he said “our Q3 results underscore the solid progress we are making against the plan we outlined last quarter to reduce costs, simplify our portfolio, and improve organizational efficiency. We delivered revenue above the midpoint of our guidance, and are acting with urgency to position the business for sustainable value creation moving forward.”

The stock popped nearly 10% after the report’s release, and while it traded a little softly into the weekend, there were signs that the bulls might be starting to take control. 

Analyst Updates for Intel Stock

Backing up this view is the fact that the team over at Northland Securities upgraded Intel to an Outperform rating at the end of last week. This was on the basis that much of the worst case scenario is now priced into the stock, and the risk/reward profile is almost too attractive to miss.  

Northland’s refreshed price target of $28 is targeting a 20% upside from current levels, and would have the stock trading at its highest level since August’s drop. It’s worth noting that the analysts at Truist Financial and Robert Baird, while neutral, also have price targets above the $23 that Intel shares closed at on Friday, suggesting the stock is seriously undervalued right now. 

Potential Concerns Around Investing in Intel

For all the cautious optimism, though, Intel obviously has a long road ahead of it, along with its fair share of skeptics. Jefferies’ Blayne Curtis highlighted that Intel’s Q4 growth relies heavily on the PC client segment, which is facing cooling demand. 

Morgan Stanley’s Joseph Moore also cautioned that Intel’s Foundry ambitions face risks, including challenges in its upcoming processes. Intel’s prospects in the near-medium term will depend heavily on how the broader market behaves. For the more risk-averse investor, it could be worth waiting to make any move until mid-November, as market direction could become clearer after several key tech earnings reports, not to mention tomorrow’s U.S. election. 

Getting Involved With Intel

For those of us on the sidelines with an appetite for risk, however, this could be a golden entry opportunity. Having weathered a tough year, the company’s fundamentals are showing signs of life, and the stock has been trending cautiously upward. 

The technical setup here adds to the bullish outlook. Intel’s Relative Strength Index (RSI), a momentum indicator that gauges overbought or oversold conditions, sits at 55, suggesting there’s a ton of room for further gains before anyone could call the stock overbought. For Intel’s long-suffering investors, that would be a nice problem to have but one that they soon might have to face.