Intel stock has declined 60% this year due to competition and manufacturing issues, potentially falling 50%.
From Nasdaq: 2024-12-30 05:03:03
Intel stock (NASDAQ:INTC) has plummeted 60% this year due to market share losses to AMD, increased competition in the AI space, and manufacturing issues. Despite this, the stock is undervalued at $27 per share, presenting a potential buying opportunity. However, there are risks that could lead to further declines of up to 50%.
Intel’s revenues dropped to $54 billion in 2023, with declining CPU sales and limited presence in AI chips. While the PC market is recovering, Intel’s revenues may not see significant growth soon. Intel stockholders express concerns over the company’s transition to advanced processes and CEO resignation, impacting future growth prospects.
Intel faces challenges in its CPU business as AMD gains market share. Increased competition from ARM-based chips in generative AI applications and GPUs threatens Intel’s market position. With projected revenues of $52 billion in 2023, Intel may struggle to achieve significant growth due to these factors, impacting margins and profitability.
Intel’s adjusted net margins have declined from over 28% in 2021 to 8.5% in 2023, with further contraction expected. The company’s foundry ramp-up and increased costs associated with production could reduce margins to about 5%. Inefficient production practices and outsourcing to TSMC may hinder Intel’s profitability in the near term. Intel’s foundry business reported a $7 billion loss in 2023, with revenues expected to decrease further. The entry of new competitors like Qualcomm and ARM may lead to discounting, impacting margins. This could result in a 37% decline in adjusted net income by 2026, potentially lowering Intel’s stock price to $10.
Despite volatile returns, patient investors may be rewarded as Intel navigates challenges. The Trefis High Quality Portfolio has outperformed the S&P 500 consistently. While Intel’s stock has seen fluctuations, a recovery is possible with valuable expertise in a growing market. The scenario could lead to a meaningful correction in stock prices if competitive threats persist.
As of December 24, 2024, Intel’s returns show a -16% monthly decline, a -59% year-to-date decrease, and a -31% total return since 2017. In comparison, the S&P 500 has seen a -1% monthly return, a 25% year-to-date increase, and a 167% total return. The Trefis Reinforced Value Portfolio has -4% monthly returns, an 18% year-to-date increase, and a 775% total return since 2016.
For investors looking to make informed decisions, Trefis offers market-beating portfolios and price estimates. The author’s views do not necessarily reflect those of Nasdaq, Inc.
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