In early 2024, I started covering Intel Corporation (NASDAQ:INTC) stock, advising investors to steer clear due to the company lagging behind competitors like NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD). After Intel’s disappointing Q1 2024 results, which led to a 26% drop in the stock price, the market began questioning the company’s future viability. Despite Intel’s attempt to highlight expense management and long-term priorities, the company’s gross profit margin still falls short compared to AMD and NVIDIA, raising concerns about its ability to compete effectively.
However, Intel remains a significant player in the semiconductor industry and has laid out plans to capitalize on AI opportunities and high-performance products. The company anticipates a cycle bottom in Q1 2024, with sequential revenue growth expected to strengthen through 2025. Intel aims to become a leading external foundry company by 2030, driven by AI advancements and new product pipelines. Recent corporate events, such as the introduction of the Gaudi 3 accelerator, indicate potential competitiveness in the enterprise AI applications space.
Despite facing risks such as increased competition from AMD and the cyclical nature of the semiconductor industry, Intel’s recent valuation suggests that the stock may be undervalued. Using a DCF model, Intel’s fair value per share is estimated to be around $37.5, indicating an 18% upside potential from the current share price. However, investors should be cautious of growing debt on the company’s balance sheet and the evolving market dynamics that could impact Intel’s future performance.
In conclusion, while Intel may have faced challenges in recent quarters, the company still holds promise for growth and innovation in the semiconductor industry. With strategic initiatives and new product developments in the pipeline, investors may see potential for Intel to rebound from its current position as a market laggard. Therefore, an upgrade in the stock recommendation from ‘Neutral’ to ‘Buy’ may be warranted based on the potential upside indicated by the DCF model analysis.
Overall, it is important for investors to consider the fundamental strengths and weaknesses of Intel, along with the broader market trends, before making investment decisions. Intel’s ability to adapt to changing market conditions and capitalize on emerging opportunities will be crucial for its future success in the semiconductor industry.
Article Source
https://seekingalpha.com/article/4695082-intel-stock-why-im-turning-bullish-now-ratings-upgrade
