It’s been a while since investor enthusiasm and Intel (NASDAQ:INTC) stock have been used in the same sentence. But that could all change. Assuming, of course, the chip maker’s changes to its game plan pay off in the years ahead.
As you may have heard, the company plans to invest heavily into the build out of its chip foundry business. Also, it’s making moves that could increase its ability to prevent Advanced Micro Devices (NASDAQ:AMD) from grabbing more of its CPU market share. An upcoming line of GPUs may help it compete better against its main rival in that area, Nvidia (NASDAQ:NVDA).
The company’s activities in the world of autonomous vehicles, or AVs, is something else that could get investors excited about its stock once again. Written off as a dinosaur in recent years, Intel could start delivering stronger returns going forward.
Admittedly, this remains a “show me” situation. It may take years for the stock to shake off its value trap status. Not only that, there’s the risk the company’s plans fail to deliver.
So, what’s the best move today, even as there’s more to be excited about here than just Intel’s low valuation? Don’t rush into it. In the near term, INTC stock could stay stuck at current levels (around $53 per share).
INTC Stock and the Chip Maker’s Turnaround
Since taking over the CEO role in February, Pat Gelsinger has put some big plans into motion at Intel. First, the chip maker’s ambitious plans to become a leading chip foundry. Stateside, Intel is investing $20 billion into two new plants in Arizona, as well as working with the Department of Defense to re-shore domestic chip production. Over in Europe, it plans to invest nearly $100 billion into new facilities. Primarily, to capitalize on the increasing demand for automotive semiconductors.
Second, the company’s moves to keep competition at bay. Its upcoming Alder Lake line of CPUs could give it greater ability to fight back against AMD. Its Arc line of graphics cards may threaten Nvidia’s leading share in GPU.
Third, via its Mobileye unit, Intel is partnering with Germany-based Sixt SE to launch a robotaxi service in that company’s home market. This is on top of other moves it’s made when it comes to self-driving cars. You may recall Mobileye is partnering with EV maker Nio (NYSE:NIO) on robotaxi development in China.
If it finds success with any or all of these initiatives, Intel could finally get into growth mode once again. This could pave the way for INTC stock to move out of the $50 to $70 per share range it’s been stuck in since 2018. It has a lot of promise, but it’s going to take time for this promise to translate into results.
Why Intel Could Continue to Disappoint
The chip maker may have big plans in the works, but it won’t go from dinosaur to dynamo in just a few quarters. Or even years, for that matter. As a Seeking Alpha commentator wrote earlier this month, it may not be until 2024 or 2025 that its results substantially improve.
In other words, INTC stock could continue to stay stuck in neutral for longer than you think. Again, this is assuming that its game plan mentioned above plays out as Gelsinger intends. The global chip shortage is playing a big role in the company’s latest foundry-related plans.
But what happens after Intel, along with foundry names like Taiwan Semiconductor Manufacturing (NYSE:TSM), build out capacity? The actions being taken now to counter the chip shortage could pave the way for another chip glut down, as has happened in prior cycles. With regards to competing with AMD and Nvidia, it may be a case of too little too late. It’s also unclear when, or even if, Mobileye will start generating the level of revenue/earnings needed to make the company’s $15.3 billion purchase of it in 2017 appear to be money well spent in hindsight.
Together, the uncertainty of its ambitious plans, and the long timeline for said plans, don’t count on an immediate jump for Intel shares.
The Bottom Line
With its recent developments, there’s more to like about Intel than just its bargain-basement valuation (11.5x next year’s projected earnings). If the plans discussed above pan out, shares could deliver much better returns over the next few years than they have as of late. That said, don’t think that you need to dive into it right now, to avoid “missing out’ on what’s coming next.
Many years away from taking off again (assuming its current moves prove successful), there’s plenty of time to lock down a position in INTC stock.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.