Intel (NASDAQ:INTC) has waned considerably, sinking from around $50 to just over $30 per share. Yet while the chip stock may be starting to hold steady, don’t assume that it’s time to “buy the dip.” More downside may be coming. Intel may be overvalued relative to current year forecasts, and those forecasts offer no guarantees.
Intel’s foundry-focused turnaround remains too many years away. The company could also underwhelm when it comes to capitalizing on the generative artificial intelligence growth trend. Add in other issues, and it’s clear that holding onto a position, or hastily jumping into one, is not the best course of action.
Why Intel Stock is Barely Budging on Recent News
Look at recent headlines regarding Intel. It’s clear why shares are trading sideways rather than bouncing back after this spring’s sell-off. Earlier this month, Intel unveiled a slew of new AI chips, including its Lunar Lake series of chips for use in AI-enabled PCs.
Thus far, this news has barely had any effect on the performance of Intel stock. This may have to do with PC sales forecasts. According to market researchers at IDC, PC sales could come in flat in 2024, despite the upcoming ramp up in AI-PC proliferation.
Intel’s AI potential isn’t limited to just AI-PC chips. The company has also unveiled its Xenon AI chips for the data center market. However, given how much further ahead Intel’s competitors are in this area of the AI chips market, the Xenon launch could end up being too little, too late.
That’s not all. Regarding the chip foundry build out, Intel’s other key potential catalyst, the latest developments are mixed at best.
Intel may be lining up deep-pocketed financial partners for this risky endeavor. However, while mitigating risk, bringing on partners also means lower possible upside from this catalyst as well.
Downside Drivers Keep Piling Up
Alongside the foundry financing news, here’s another headline that suggests an additional watering-down of the foundry catalyst: news of Intel halting the expansion of its Israeli chip facility. Given the current geopolitical climate, the decision makes sense.
Even so, it may nonetheless be another setback for the company. As we’ve pointed out before, the foundry catalyst isn’t likely to make a major impact on Intel’s fiscal performance until the late 2020s. In light of this latest development, the timeline could now be even further into the future.
Atop the downbeat-leaning foundry news, are some other recent developments that diminish the Intel stock bull case. We discussed the first one in our prior INTC article: tariff troubles, stemming from rising tensions between the U.S. and China. The second one has little to do with the company itself, yet it may still serve as a downward driver.
The would be a possible removal of Intel from the Dow Jones Industrial Average, replaced by a cutting-edge rival. Although still just a rumor, it may just well be another sign that INTC is more likely to keep falling out of favor than to suddenly become popular again.
The Verdict: Put it to Pasture and Stay Away
Again, INTC may be cheaper than before, but it’s hardly a bargain based on traditional valuation metrics. Shares currently trade for 28.1 times estimated 2024 earnings. Hence, the market is clearly still heavily pricing in the increasingly-questionable turnaround.
In the months ahead, if disappointment continues to pile up, forget about the stock just languishing at around $30 per share. A move back down to prior lows in the mid-$20s may come next. A continued slide to even lower prices may be in the cards, depending on how successful (or how unsuccessful) Intel’s AI chip rollout ends up being.
Taking all of this into account, here’s the verdict. If Intel stock is still in your portfolio, it’s time to put it to pasture. Otherwise, stay away.
Intel stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
