While the S&P 500, Dow, and Nasdaq all brought a dash of optimism to the trading floor, Intel tripped, closing lower even though it rode out a month-long rally that left competitors in its dust. The irony is that the chip behemoth has momentum in the larger picture, but in the shorter term, it’s stumbling over its own success.
Intel finished its most recent trading session at $28.76, down -2.77% on the day. The drop occurred while the general markets rose, with the S&P 500 up 0.44%, along with the Dow that was up 0.14%, and Nasdaq was up 0.7%. Tech stocks in general gained from the strength of the sector, but Intel’s fall was notable as it lagged its competitors.
Strong Monthly Advancements
Regardless of the recent decline, Intel stock rose to 19.27% during the last month, surpassing both the 9.59% increase of the Computer and Technology sector and the 4.03% gain of the S&P 500. This shows that investor sentiment regarding Intel is still robust, though short-term volatility is dictating its trading activity.
Earnings Looming in the Background
Investors are eagerly waiting for Intel’s next earnings announcement. As estimated consensus currently expects an EPS of $0, a 100% year over year increase, along with revenue of $13.12 billion, and a decrease of 1.26% from the same period last year. For the year, Intel is predicted by analysts to post earnings of $0.15 a share on revenue of $52.2 billion, which is a 215.38% rise in earnings but a 1.69% fall in revenue from last year.
Analyst Revisions & Outlook
Recent revisions to analyst estimates have been flat, which implies a cautiously stable outlook. Favorable revisions are generally considered a bullish sign, yet Intel’s unchanged estimates over the last 30 days imply a “wait-and-see” attitude. At present, Intel has a Zacks Rank of 3 (Hold), which indicates a neutral position as Wall Street considers the company’s fortunes relative to sector momentum.
Valuation Issues
In terms of valuation, Intel has a Forward P/E ratio of 204, which is very much higher than the industry average of 39.71. Its PEG ratio of 28.57 also indicates an overpriced valuation compared to its future growth. In comparison, the Semiconductor industry has a relatively lower average PEG of 4.59, which makes Intel significantly higher.
Intel is at 44 of 250+ industries as per Zacks Industry Rank, which puts it in the top 18% of all industries. Historically, the top 50% of industries perform better than the lower half, so there’s still a good sector backdrop for Intel even if its valuation is uncertain.
The Bottom Line
Intel’s underperformance on an everyday basis is a reminder of the difficulties that it has regardless of any sector and broader market winds. The company’s next set of earnings will be pivotal to establishing whether its impressive one-month recovery can be sustained. Although Intel’s valuation appears to be strained, industry positioning and recovery prospects continue to ensure that it remains in investor attention. In the meantime, with a Zacks Rank of 3 (Hold), Intel is a stock to monitor but not chase.
Intel’s dip, which is more of a near-term exchange than a fundamental red flag of a broken growth story, looks like the market taking breath. Sure, the stock is down by 2.77% at the moment, but if you zoom out a little, Intel rose almost 20% in a month, outperforming most of its sector and the macro index. However, renewed optimism in upwardly revised earnings is an indicator that Intel is not completely out of cards, rather it just needs to prove it can convert these cards into a growth story.
Intel’s misstep does not equate to losing the race, but it does remind shareholders to measure the speed as well, and not just the distance. With elevated valuations, conservative earnings expectations, and an intensely competitive chip sector, Intel needs to demonstrate that it can maintain more than fleeting rallies. The market has priced in much expectation, now it is Intel’s turn to provide performance that can rationalize it.
