Over the past few months, Intel (NASDAQ:INTC) has been rangebound, with Intel stock hovering around $30 per share price level. However, the chipmaker’s recovery is uncertain. Intel has promising potential catalysts. Intel is expanding its manufacturing infrastructure to become a major chip foundry for its own chips and third-party designers.
Still, as has been the case, this future potential remains too heavily accounted for in INTC’s valuation. After the disappointment revealed thus far, additional rounds of disappointment may lie ahead. That’s bad news, in terms of the possibility of further downside risk.
Intel Stock: Why the Slump has Continued
INTC hasn’t made a lively move since late April. That’s when shares sold off following the company’s latest earnings release. This isn’t surprising. Subsequent news with Intel has hardly been cause for celebration.
That’s not to say that the latest news regarding Intel stock has been materially negative. Instead, these headlines haven’t been bad enough to drive another sell-off, yet not good enough to convince investors to “buy the dip.” Here a few examples.
First, Intel’s AI chip announcements earlier this month. While indicating that the company is working to catch up with its further-ahead peers, these unveiling did little to inspire bullishness.
Alongside this, the latest headlines regarding Intel’s foundry build out hardly inspire confidence, either. As we have noted previously, the company has halted a planned expansion of its Israeli facility.
This, coupled with delays with Intel’s other foundry projects, most notably its $20 billion foundry project in Ohio, underscores the fact that this catalyst isn’t likely to make much of an impact on Intel’s fiscal performance until later this decade, at the earliest.
If this slump isn’t bad enough, what comes next could end up being worse for Intel stock investors.
From ‘Show Me’ to ‘Woe is Me’
INTC continues to be a “show me” stock. Yet while this suggests at first that Intel could hold steady, before surging on the next round of good news, you may not want to quickly jump to that conclusion.
At least, based on Dan Ives’ recent commentary on Intel stock. At an investing conference hosted by Seeking Alpha, the Wedbush analyst presented his downbeat take on the chipmaker’s shares.
Ives called INTC “the biggest head-scratcher in tech,” arguing that, even if Intel CEO Pat Gelsinger is aggressive in playing AI ketchup with competitors, it could still be a “turnaround for the ages.”
These comments highlight the illogical valuation of Intel. At current prices, INTC sells for 27.8 times estimated 2024 earnings.
Intel has thus far been able to maintain this valuation. Largely, because sell-side forecasts call for earnings to bounce back by 80% in 2025, thanks to Intel’s AI catalyst. However, if Intel’s AI chip rollout falls short of expectations? INTC could go from “show me” stock to “woe is me” stock.
The Verdict: At the Very Least, Wait for a Margin of Safety
It’s very possible that Dan Ives’ downbeat view on Intel is on the money. If that proves to be the case, what remains of optimism for Intel could quickly evaporate in the coming quarters.
Downward revisions to 2025 forecasts could push shares back to the mid-$20s per share. Perhaps, even lower, given a lack of AI success will mean greater dependence on the fading foundry catalyst to turn around the ship.
Although nobody’s stopping you if you want to go contrarian on Intel today, that doesn’t mean you need to run out now and grab a position.
At the very least, wait for the next round of major weakness. A derating for Intel stock will create a greater margin of safety for making a wager that this “behind the eight ball” AI chip contender ultimately prevails.
Intel stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
