Source: PaxForex Premium Analytics Portal, Fundamental Insight
The other day there were several significant events with Intel stock. The company published its Q3 earnings report, disappointing investors on earnings and revising downward its earnings forecasts.
But despite this news, Intel stock rose in trading the next day. Given these results and the reaction to them, maybe it's finally time to buy Intel stock.
Of course, Intel's latest earnings report shows the depth of its problems. In the third quarter of 2022, the company reported revenue of $15.3 billion. From a GAAP perspective, that's 20 percent less than a year earlier, but slightly above the consensus forecast of $15.25 billion.
However, the net income was $1 billion, or $0.25 per share. Analysts had expected $0.32 per share. Moreover, the 2022 forecast of $63-64 billion represents a significant drop from the $65-68 billion forecast in the second quarter.
The company cited a "pronounced slowdown in demand" for both results and the outlook during its Q3 2022 earnings call. However, the company also noted that the PC sector showed improvement in Q3.
The rising stock price may mean that investors have finally gained some perspective on Intel stock. At first glance, this may seem like a no-brainer. Both Taiwan Semiconductor and Samsung continue to hold years of technical leadership. In addition, according to DigiTimes, longtime rival AMD continues to wrest more market share from Intel in the server market.
Nevertheless, Intel's stock has fallen so much that it is selling for less than 1.2 times its book value. At one point, after falling to a recent intraday low of $24.59 per share, the company briefly dipped below that critical level.
A move below book value means a high probability of bankruptcy. Although Intel is still struggling, the expected revenue of $63 billion to $64 billion makes it the largest manufacturer in the industry, with the exception of Samsung and TSMC. This is hardly an indication that the company is going under.
Moreover, it still operates the largest number of foundries in the United States. This is important, given its efforts to offshore some of its chip production. For these reasons, the $53 billion in subsidies approved by the U.S. government should help Intel.
Of course, many investors doubt Intel's plans to regain technical leadership by 2025. Nevertheless, the production of 10-nm chips puts Intel in third place among the most advanced chip makers.
In addition, foundries, from TSMC to GlobalFoundries, have built their business on less advanced chips. With Intel entering the foundry business with Intel Foundry Services, it is likely that more customers will turn to Intel chips as conditions improve, even if it fails to gain technical leadership.
In addition, Mobileye, an autonomous driving company, is now trading in the market. With this stock tracker, this segment could unlock much of its value, giving Intel stock a boost.
At current levels, Intel looks like a buy. Indeed, it is far behind the industry leaders, and it remains to be seen if and when it will catch up with them.
However, the semiconductor company's stock is trading barely above book value. That valuation leaves little room for the stock to fall. In addition, Intel's huge production volumes, leadership in data centers, and growing foundry business could help boost the company's stock. This means that even if the tech leader remains elusive, there should be no stock recovery.
As long as the price is above 27.50, follow the recommendations below:
- Time frame: D1
- Recommendation:long position
- Entry point: 28.23
- Take Profit 1: 30.00
- Take Profit 2: 32.00
Alternative scenario:
If the level of 27.50 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 27.50
- Take Profit 1: 26.00
- Take Profit 2: 25.00
