The criticisms of Intel’s (NASDAQ:INTC) past decisions are, unfortunately, 100% on-target. INTC dropped the R&D ball, letting rival Advanced Micro Devices (NASDAQ:AMD) catch up. The owners of INTC stock have paid the price, not only with the shares’ subpar performance since the middle of last year, but with some sea-sickening volatility. In the latest chapter of the saga, INTC has been unable to meet the demand for its products.
If your gut is telling you to step into Intel stock despite the troubling headlines, trust your gut. The worst-case scenario for the next 12 months is already priced into INTC. It’s now time to start looking into 2021, which actually appears to to be pretty healthy.
And, sooner than later might be better, if you’re going to buy Intel stock. INTC should spend most of 2020 moving towards a price that better reflects what’s in the cards for the following year.
Intel Is Ready for a Rematch
After AMD was largely left for dead in 2015 and Nvidia (NASDAQ:NVDA) was seemingly disinterested in moving onto Intel’s turf in the same year, it’s not difficult to understand how Intel became complacent. Although INTC was in a good position to start the push toward 7-nanometer processors at the time, with Advanced Micro Devices out of the way, there was no particular hurry.
New computing technologies are neither easy nor quick to develop, though. By the time anyone realized AMD was getting serious about making ultra-fast 7 nm chips, Intel was already years behind.
Take a closer, critical look at the headlines, though . Intel isn’t quite as “on its heels” as it felt like it was just a few weeks ago. And AMD’s new lead on its bigger rival isn’t quite as firmed up as many have assumed.
Advanced Micro Devices may have been the first to the market with a 7-nanometer processor, but not all of its Ryzen 300 chips’ cores can reach their top theoretical speed. Some suspect the company’s rush to get a 7-nanometer processor is partly to blame for the surprising shortcoming. The now-delayed Ryzen 3950x underscores the notion that AMD has been rushing its product development efforts.
Meanwhile, last week Intel announced that, sometime in 2020. it would be launching an enterprise-level solid state drive which utilizes 144-layer quad level cell NAND technology The drive should lower data centers’ costs to own and run hardware,. As a result, it could win back some of the data-center business Intel lost to Advanced Micro Devices.
Analysts don’t appear to see these subtle shifts. As of the most recent look, the usually-bullish analyst community, on average, has a “hold” rating on Intel stock, Analysts’ current average target price of $53.13 is only a few percent above the price at which INTC stock closed on Friday. The pros clearly aren’t thrilled with the stock.
Those pros may be as jaded by the headlines as most investors are, preventing them from fully seeing the company’s potential after 2020.
The stock market. though,won’t be distracted … at least not for very long. If Intel can continue to dig its way out of this rough patch, INTC stock will rally. Moreover, analysts’ pessimism towards Intel stock may actually be beneficial, leaving room for the upgrades that tend to spur stocks upward.
To that end, the stock’s trailing price-earnings ratio of 11.8 and its forward-looking P/E of 11.4 are dirt-cheap compared to its peers right now. Even the same analysts calling the stock a “hold” still suspect the tech giant is going to muster healthy net-income growth.
The real trick when it comes to INTC stock at this point is timing trades. Much can happen between now and 2021, en route to a higher valuation for Intel stock.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.