Intel Stock Fireworks: Will the Flash Lead to an Explosion?

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With Independence Day on our minds and in our hearts, it’s not hard to think of fireworks when looking back at Intel’s (NASDAQ:INTC) explosive price action over the past month. (Moreover, perhaps not coincidentally, Intel is working on a project to replace traditional fireworks displays with less dangerous and more environmentally friendly drone light shows.)

Intel Stock Fireworks: Will the Flash Lead to an Explosion?

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Year-to-date, the Intel stock price isn’t very different from where it began in January; the month of June, however, saw INTC stock in a smooth and uninterrupted ascent. So, was this the start of an explosive move … or just a flash in the pan?

What Goes Up…

After any fireworks display, the excitement must eventually fade, leaving nothing but a big mess to clean up (and hopefully no injuries). After gaining 7% in June — outperforming the computer and technology sector’s increase of 4% and the S&P 500’s 5% move during that time — some analysts aren’t particularly eager to accumulate Intel stock shares at the current price point.

It seems that analysts’ primary fear revolves around Intel’s upcoming earnings report on July 25. Talk about low expectations: analysts expect the company to post earnings of 89 cents per share, indicating a year-over-year decline of 15%. Zacks, meanwhile, is predicting earnings of $4.23 per share and revenues of $68.51 billion, which would represent year-over-year changes of -7.64% in EPS and -3.3% in revenues.

Nothing to Celebrate in INTC Stock?

Clearly, there’s no shortage of pessimism. For instance, Citi Research analyst Christopher Danely asserted that he “would not chase” INTC stock as he sees “downside to consensus estimates even with the new policies.” (Evidently, Danley was referring to the recent easing of the American prohibition on selling semiconductors to Huawei.)

On the other hand, Danley may just be bearish on the semiconductor sector generally (or maybe he just has a deep-seated fear of chasing things?). He also issued a warning against chasing Micron (NASDAQ:MU) stock, citing his belief that his view that the “DRAM crash” will continue throughout the year.

Bernstein analyst Stacy Rasgon also chimed in with a bearish view on Intel, claiming that INTC stock “seems to have little going for it at the moment.” Lowering his price target on Intel stock to $39 from $42, Rasgon reasoned that the main bullish argument for Intel shares is that they’re cheap, as they’ve had a 12% drop over the past three months.

No Love

Rasgon’s contention strikes me as a classic “straw man” argument, as I’ve never heard of anyone buying INTC shares just because they’re cheap. Rather, I view Danley’s and Rasgon’s vitriol as typical analyst bandwagon behavior: low expectations tend to beget low expectations among market soothsayers.

As I see it, there’s more to Intel than just the price action. In terms of its valuation, INTC indicates a forward P/E ratio of 11x, which is comparatively favorable its industry’s average forward P/E ratio of 16x. Moreover, Intel currently has a PEG ratio of 1.5, marking INTC stock as a superior value to the sector generally, which has a PEG ratio of 1.85.

The Bottom Line on Intel Stock

Investors have every right to choose to ignore the pessimists and hold their positions in INTC stock. It’s still the biggest semiconductor company and remains a good value in its niche (remember, Warren Buffett once said that price is what you pay, but value is what you get). And so, unlike a fireworks display, Intel can continue to ascend even after the crowd (composed of dreary analysts, in this case) has gone home.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2019/07/intel-stock-fireworks-will-the-flash-lead-to-an-explosion/.

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