The stock market is still hanging tough near it’s all-time highs. However, investor sentiment is nowhere near that. In fact, it is the one variable that keeps flip-flopping on us. We have become headline traders as a baseline. There’s much less emphasis on fundamentals, which left Intel (NASDAQ:INTC) stock at a disadvantage. Boring and non-flamboyant stocks fell off traders’ radars.
Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) hog the headlines. But Intel is bigger than both of them combined and twice over. This was my bullish thesis last week to my chatroom members. Then it popped 12% out of the blue on headlines.
Intel is looking to spin Mobileye off onto its own. Now that’s the kind of headline the new investors chase.
I emphasize new investors because those with more experience would not have. They would not have bought it on a headline going into prior failure levels. Those who bought the pop are sitting on fast losses. Now is a better time to get in, not on Monday.
INTC stock is still a bargain by all definitions. Nevertheless, I would not go all in. Instead, I’d leave room for error.
Outside Risks Exist With INTC Stock
I recognize INTC’s value, so I anticipate the setup for a long-term stock recovery. It is still the behemoth in the field and it will regain investor confidence. Management has been lackluster for too long, and just like GE (NYSE:GE), for example, they will need to snap out of it. Committing long at these levels is sane, but there are outside risks.
The indices bring a threat to timing because we could correct from these altitudes. The macroeconomic conditions do not demand it, because there’s just too much money in circulation.
Spending trillions requires a lot of time. In fact, we could spend $1 million a day and need 2,740 years to burn only $1 trillion. Therefore, inflation is here to stay regardless of what the Federal Reserve does. They could talk tough, but I doubt they will be too hawkish. This leaves INTC stock to recover nicely off the lows that it just made.
Intel Is Cheap
Valuation is a selling point and will not be a detriment for a long time. It has a price-to-earnings ratio that just exceeded the single digits. Its price-the-sales ratio is under 3x, so there’s very little premium in the price. Investors have been too humble with their assessment of the stock price.
Total revenues have grown steadily in past years even through the pandemic. Net income more than doubled in 4 years. Clearly management is making the best out of its tepid sales growth. Intel’s management is flowing revenues freely to the bottom line. After all, this is the end game for every company regardless of the business they’re in.
With that in mind, let’s recap the situation for INTC stock. Sales are growing albeit not too fast, and the bottom line is exploding higher. Moreover, the valuation has continued to fall steadily. Sign me up, as this is the definition of having more upside potential than downside risk.
INTC: Lean But Not Yet Mean
There isn’t a lot of fat on this stock, so it can absorb a correction better than others. NVDA and AMD, even though they are not exorbitantly expensive, have easier froth to shed if equities stumble. My overall macroeconomic outlook is still positive. As such, I don’t insist on having a correction.
However, investors should be ready for that just in case. No one should be all in with anything regardless of how good the deal is. At the end of the day, overall demand on Intel products will remain strong for as long as this digitization trend explodes higher.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.