Case Study: What Credible analysts are saying on Intel (INTC) stock
Key Points
Performance
Intel shares rallied by 7.48% this week, significantly outperforming the broader markets. However, on a trailing twelve month basis, Intel shares are still down by 46.81%, underperforming the S&P 500, which is down by just 17.06% during this same period of time.
Event & Impact
After several years of underperformance where Intel lost notable market share to peers such as Advanced Micro Devices, Taiwan Semiconductor, and Samsung, the company hopes that its new CEO’s restructuring plan will allow for it to make up lost ground by 2025.
Noteworthy News:
Intel plans to open up the world's largest chip making facility in Ohio in the coming years, bringing back much needed domestic production of high-end semiconductors.
Nobias Insights
47% of recent articles published by credible authors focused on INTC shares express a “Bearish” bias. 7 out of the 13 credible credible Wall Street analysts who cover Intel believe shares are likely to fall in value. However, amongst these 13 credible individuals, the average price target being applied to INTC is $37.25, which implies upside potential of approximately 29.7% relative to INTC’s current share price of $28.76.
Bullish Take Lee Jackson, a Nobias 4-star rated author, said: “This legacy leader in semiconductors has been hammered, and while some feel it is a value trap, it is hard to count out the company that defined the semiconductor revolution.”
Bearish Take Rob Starks Jr., a Nobias 5-star rated author, said, “Because Intel's management fumbled the ball the last several years, Advanced Micro Devices (AMD) caught up; AMD is now eating Intel's lunch in the data center space, and gaining market share.”
INTC Jan 2023
After a tumultuous 2022, where Intel (INTC) shares declined by approximately 48.1%, they’re off to the races thus far during 2023. On a year-to-date basis, Intel has rallied by 7.48%. Investors who subscribe to the Dogs of the Dow strategy aren’t surprised by this.
According to Investopedia, the, ‘"Dogs of the Dow" is an investment strategy that attempts to beat the Dow Jones Industrial Average (DJIA) each year by leaning portfolios toward high-yield investments. The general concept is to allocate money to the 10 highest dividend-yielding, blue-chip stocks among the 30 components of the DJIA. This strategy requires rebalancing at the beginning of each calendar year
Beginning the year with a 5.5% dividend yield, Intel was one of the highest yielding Dow stocks at the end of 2022. And, it appears that the credible analysts tracked by the Nobias algorithm agree with Intel’s rebound potential. Currently, their average price target for INTC shares implies potential of nearly 30%.
Bearish Nobias Credible Analysts Opinions:
Rob Starks Jr., a Nobias 5-star rated author, recently published a bullish article at the Motley Fool titled, “With Its Stock Near a 52-Week Low, Is Intel a Buy?” He began his report, highlighting Intel’s recent struggles, especially when it came to losing market share to its largest peers in the semiconductor industry.
Starks said , “Between the chip industry sinking into a cyclical downturn and competitors eating away at its market share, Intel had a disastrous 2022.” He continued, “Investors have soured on the stock, as Intel's two most significant revenue-generating segments, the client computing group (CCG) and datacenter and AI group (DCAI), have deteriorated significantly in 2022.”
Regarding Intel’s most recent quarterly data, Starks wrote, “In the third-quarter earnings report, CCG declined 17% from the previous year's comparable period to $8.1 billion, and DCAI dropped 27% to $4.2 billion.”
“Additionally,” he continued, “consolidated gross margin has shrunk from 56% in the third quarter of 2021 to only 42.6% in the third quarter of 2022. Worse, operating margin showed a loss of 1.1% -- a terrible result.”
Regarding competition, Starks said, “Because Intel's management fumbled the ball the last several years, Advanced Micro Devices (AMD) caught up; AMD is now eating Intel's lunch in the data center space, and gaining market share.” He also stated that Intel lost ground to Taiwan Semiconductor (TSM) when it comes to manufacturing high-end chips.
Yet, Starks says, there could be sunnier skies on the horizon. He stated, “Gelsinger [referring to Patrick Gelsinger Intel’s new CEO] said on the Q3 earnings call that he believes the company is now on track to regain transistor performance leadership by 2025.”
He also mentioned that Gelsinger turnaround plan included goals to take back lost leadership. “Intel's goal is to become the No. 2 contract chipmaker worldwide by the end of the decade -- an ambitious goal since it only started its contract operation in 2021,” he said.
The recently passed CHIPS act is expected to play a major role in Intel’s turnaround. Starks wrote, “This legislation provides $39 billion in manufacturing subsidies to construct semiconductor fabrication plants (fabs) and an additional $24 billion in tax credits for companies engaged in domestic chip production.”
Despite his expectations that the semiconductor space is likely to continue to experience growth headwinds throughout 2023, Starks concluded his piece stating, “Considering Intel's low valuation, now is a great time to buy the stock for the long term.”
Bullish Nobias Credible Analysts Opinions:
Lee Jackson, a Nobias 4-star rated author, also recently highlighted Intel in an bullish light as one of his picks in an article titled, “5 Dow Stocks With the Biggest Dividends Could Be Huge 2023 Winners”.
Currently, Intel shares trade for $28.74 and therefore, the stock’s $1.46/share annual dividend equates to a dividend yield of 5.30%. This is well above the 1.67% dividend yield that the S&P 500 SPDR Trust ETF (SPY) offers investors. It’s also multiple times larger than the 1.26% yield that the iShares Semiconductor ETF (SOXX) offers.
Regarding Intel, Jackson said, “This legacy leader in semiconductors has been hammered, and while some feel it is a value trap, it is hard to count out the company that defined the semiconductor revolution.”
He touched upon Intel’s operations, stating that its chip platforms “are used in various computing applications, comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Like Starks, Jackson mentioned the CHIPS Act and Intel’s U.S. infrastructure buildout plans stating: “Intel announced almost a year ago that it would invest significantly to build potentially the world’s largest chip-making complex in Ohio, looking to boost capacity as a global shortage of semiconductors affects everything from smartphones to automobiles. Intel says the 1,000-acre “mega-site” northeast of Columbus has room for as many as eight plants, known as “fabs.” The company estimates it would require a $100-billion investment to fully build and equip those plants.” Jackson mentioned that Wall Street’s consensus price target for Intel shares is $31.13, and therefore, relative to the stock’s current share price, the stock has double digit upside potential.
Overall bias of Nobias Credible Analysts and Bloggers:
The analysts deemed credible by the Nobias algorithm are even more bullish on Intel shares. These analysts are mixed, with 7 out of the 13 reports regarding Intel containing “Bearish” sentiment; however, the average credible analyst price target for Intel currently sits at $37.25. Relative to Intel’s closing share price today of $28.73, that $37.25 average price target implies upside potential of approximately 29.7%.
It’s worth noting that 47% of recent articles published by credible authors (individuals with 4 and 5-star ratings by the Nobias algorithm) have expressed a “Bearish” sentiment. Therefore, it’s clear that not everyone believes that Intel is a great value as opposed to a value trap; yet, the average credible analyst price target implies an attractive risk/reward proposition.
Disclosure: Nicholas Ward has no INTC position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.