Source: PaxForex Premium Analytics Portal, Fundamental Insight
Intel has faced a challenging year so far, with shares plummeting nearly 33%, a stark contrast to the 38% gain seen in the PHLX Semiconductor Sector index. However, recent stock price movements suggest potential momentum for Intel. This month, Intel's shares have surged nearly 12%, outperforming the PHLX index, buoyed by a 6% jump on July 8 following positive Wall Street coverage.
Analyst Ben Reitzes from Melius Research posits that Intel could become a leading pick in the artificial intelligence (AI) sector in the latter half of 2024, driven by the increasing demand for AI-enabled personal computers that could boost its client business.
Intel is already seeing a positive shift in the PC market this year. The company's client computing group (CCG), which includes processors for PCs, laptops, and workstations, reported a 31% year-over-year revenue increase in Q1 2024, reaching $7.5 billion. Intel's total Q1 revenue was $12.7 billion, up 9% from the same period last year. The CCG segment contributed 59% of Intel's revenue, highlighting its significant impact.
Intel plans to ship over 40 million AI PC processors in 2024, a target that aligns closely with market research firm Canalys' projection of 48 million AI PCs for the year. If Intel meets its shipment forecast, it could secure a substantial share of this rapidly growing market, which Canalys estimates will grow at an annual rate of 44% over the next five years, presenting Intel with a significant growth opportunity.
The demand for Intel's AI PC processors is already robust. CEO Pat Gelsinger noted during the April earnings call that the ramp-up of Intel's Core Ultra processors, led by Meteor Lake, is surpassing expectations, with units expected to double sequentially in Q2. Gelsinger highlighted that supply constraints are the primary limitation, but improvements in supply chain logistics should enable Intel to exceed its 40 million AI PC CPU target for 2024.
This strong demand and focus on enhancing supply suggest that Intel's CCG business is poised for continued growth in 2024 and beyond. With Canalys forecasting 150 million AI PC shipments next year, a strengthened supply chain could help Intel capture a larger share of this expanding market.
Analysts forecast Intel's revenue to reach $55.9 billion this year, marking a 3% increase from the previous year. This top-line growth is expected to accelerate in the coming years. Additionally, analysts predict a significant improvement in Intel's bottom line from last year's $1.05 per share.
Intel's bottom line is projected to grow at an impressive annual rate of nearly 40% over the next five years. The strength of the company's client computing business supports this optimistic outlook. In Q1, Intel reported a remarkable turnaround in its bottom line, with adjusted earnings of $0.18 per share compared to a loss of $0.04 per share in the same quarter last year.
Currently trading at 30 times forward earnings, Intel remains an attractive buy, especially since it trades at a discount compared to the US technology sector's average earnings multiple of 48. With AI poised to drive substantial growth in Intel's bottom line in the long term, investors may find now an opportune time to invest in this semiconductor stock.
As long as the price is above 32.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 34.33
- Take Profit 1: 37.00
- Take Profit 2: 40.00
Alternative scenario:
If the level of 32.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 32.00
- Take Profit 1: 30.00
- Take Profit 2: 28.00
