If Intel Corporation (NASDAQ:INTC) is going to continue its advance, it will largely depend on the overall market and what it does following the Congressional testimony of new Fed chair Jerome Powell on Thursday. The stock market, which has been resilient in the days and weeks following its early February tumble, has come under pressure since Powell’s testimony began in late February.
Before that, Intel stock was working on a breakout over $50. But will it prove to be a false breakout?
If the stock fails to push through the $50 level, it will be. However, investors shouldn’t get too disappointed. There are many stocks going through the same setup now. Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) are just two that are teetering on breakout territory as well.
Unlike the banks though, INTC stock is running into its highs made during the dot-com bubble.
Valuing Intel Stock
Intel stock isn’t the sexiest name in the group. Specifically, Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nvidia Corporation (NASDAQ:NVDA) both have better growth prospects. On the flip side, though, INTC stock has the lowest valuation of the three.
As a matter of fact, I think investors could hold a position in each one of these stocks. The “basket approach” helps to diversify single-stock risk and can work well if the whole group continues higher. It’s also a solid approach to these three names because each brings something different to the table.
For instance, Nvidia is an attractive holding because it continues to annihilate analyst expectations while setting the bar high for the world’s most advanced technologies. AMD is attractive as CEO Lisa Su continues to grow revenue by positioning the company in strong growth markets. Additionally, its balance sheet is improving, and profitability is finally a reality.
So what about Intel?
Intel is now entering fiscal 2018. For the year, analysts are looking for sales growth of just 3.5%, and in 2019, they expect 3.7%. On the earnings front, they expect 2.6% and 7% growth for 2018 and 2019, respectively. For this, we’re paying just 13.8 times this year’s estimates and only 12.9 times 2019 estimates. Don’t forget that Intel stock also yields almost 2.5% with its dividend.
Like I said, it’s not the fastest-growing company out there, especially compared to AMD and Nvidia. But its purchase of Mobileye and its advances in drones and IOT devices show that management does not plan to let Intel fall behind.
Investors seeking a consistent, high-quality company with a dirt-cheap valuation should consider Intel. If it’s not intriguing enough on its own, the basket approach is another consideration.
Trading INTC Stock
INTC stock may be attractive on the valuation front, but what about the charts? Below are two charts of Intel stock, one is a 20-year weekly, and the other is a seven-month daily.
Click to Enlarge
Click to Enlarge
As you can see above, INTC stock is running headfirst into multi-decade resistance. Given that this level was previously seen during the dot-com bust, though, it’s hard to say how stiff of resistance it will be. That’s why I think it depends on the overall market. If the S&P 500 and Nasdaq are unable to churn higher, I think it will weigh down Intel stock and keep it from pushing through.
But that’s not always a bad thing! As you can see on the short-term chart, Intel stock has gone from $43 earlier this month to $50 in just a few weeks. Having it cool off would actually be a good thing.
Provided that the market doesn’t suffer a major pullback, investors may consider buying Intel stock between $46 (50-day moving average support) and $48 (top of range support, blue line on short-term chart).
Given that Intel’s fundamentals are much better than they were in 2000, I think it’s only a matter of time before it pushes through $50. Should it do so, where does it go?
On Feb. 27, Citi analyst Christopher Danely reiterated his buy rating, named Intel stock a top pick and reiterated his $58 price target. A day later, Nomura analysts gave a bump to their price target too, moving it from $50 to $60.
These would be big gains, but they don’t seem totally unrealistic.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in NVDA.
