Intel (NASDAQ:INTC) has seen its value drop precipitously on several occasions over the past two years. In the summer of 2018, it began a steep decline that lasted well into the fall. Last April, Intel stock dropped 25% in little over a month. However, since then, the stock has been on a tear.
It’s up 50% since last August. Now trading at $67.46, it has posted a gain of nearly 13% so far in 2020 alone — helped by a big Q4 earnings beat in January.
The question is, will Intel continue to shine in 2020? Or is it due for another one of those big corrections? Here are four factors that have the potential to trip up the company’s current run.
Advanced Micro Devices
Advanced Micro Devices (NASDAQ:AMD) has been a thorn in Intel’s side for the past several years. AMD has been cutting into Intel’s marketshare in desktop computer PCs.
At CES it unveiled new Ryzen mobile processors that seriously outperform Intel’s offerings, and announced that over 100 laptops are already signed up to ship with “AMD Inside” in 2020. AMD has also launched an assault on Intel’s data center business.
Last fall, the company announced second generation Epyc processors that are now being used in data centers by high profile clients, including Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google.
Apple
The last big drop in Intel stock was last April, and it kicked off shortly after news that Apple (NASDAQ:AAPL) was dumping Intel modems in the iPhone in favor of a return to Qualcomm (NASDAQ:QCOM).
Rumors have been growing that Apple is planning to dump Intel processors in its MacBooks this fall in favor of its own ARM-designed chips. If that happens, it would be another Apple-induced blow to Intel. If Apple is successful, it could also tempt other PC manufacturers to follow suit.
China
Intel sees 24% of its revenue generated by the Chinese market. Because of that exposure, it’s one of the American chipmakers that saw its stock hit by the launch of the trade war between the U.S. and China in 2018.
The company has also benefited from the thawing of trade relations between the two countries, especially since the fall of 2019, when a Phase One trade deal was first announced. However, if the trade war should heat up again, Intel is exposed. Another risk is China’s slowing economy, with growth recently nearing a 30-year low.
Coronavirus
A wild card in the 2020 mix for Intel is the coronavirus from China. So far, it’s having an impact on the Chinese economy, and there have been plant closures.
Should the coronavirus breakout spread further in China, it could result in PC manufacturers closing factories and halting production, slowing demand for Intel chips. In the bigger picture, if the coronavirus turns into a worldwide epidemic, it could trigger a global recession. That would be bad news for virtually all stocks, including shares of Intel.
Bottom Line on Intel Stock
Investment analysts polled by The Wall Street Journal are taking a cautious line on Intel stock, giving it a consensus “hold” rating. Their median 12-month price target of $66.41 shows no confidence that Intel stock is going to continue its current gains through 2020. Among the 40 in the group, the highest price target is $85, which represents 26% upside.
On the other side of the equation, InvestorPlace Markets Analyst Luke Lango has Intel in his list of Strong Value Stocks for 2020. He notes Intel’s “combination of big growth exposure and dirt cheap valuation” will help it to out-perform.
What will Intel’s story end up being for 2020?
AMD is a real threat, but other factors are conjecture at this point. If any of them end up coming into play, Intel could stumble. If they don’t, Intel stock could very well continue its growth streak and perform well in 2020.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
