While patience pays in the stock market, this hasn’t been the case for the shareholders of chip giant Intel Corporation (NASDAQ:INTC). For instance, if you have been holding INTC stock for about five years (a considerable investment horizon), you are probably sitting on a loss of about 41%.
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In comparison, the SPDR S&P 500 ETF Trust (SPY), which aims to deliver investment results similar to the S&P 500 Index (SPX), has given a return of about 45% (learn more about investing in SPY here).
Intel’s underperformance has eroded investors’ wealth, and given the ongoing weakness in the PC market and competitive pressure, INTC stock could remain under pressure in the coming years.
Providing his outlook on INTC stock, Rosenblatt Securities analyst Hans Mosesmann stated that the company will be “structurally challenged for the foreseeable future.”
Mosesmann expects Intel’s business to witness challenges given the market share losses in the data center, regardless of the recovery in the PC market. He added, “With no defense mechanisms in place in the data center, we see AMD (AMD) at least quadrupling its share from ~10% in 2021 in the next couple of years.”
Besides competitive headwinds, macro uncertainties will likely ruin the show for Intel. The company delivered adjusted revenues of $15.3 billion for the quarter that ended on October 1. Its Q3 revenues declined 15% year-over-year, reflecting weak demand amid economic deterioration. Further, due to worsening economic conditions, Intel lowered its revenue guidance to $63-64 billion for 2022 from $65-68 billion. Nevertheless, Intel delivered adjusted EPS of $0.59 per share, which surpassed Street’s expectations of $0.37.
Citing uncertainty, Intel’s CFO, David Zinsner, expects the macro challenges to “extend well into 2023 with the potential for a global recession.”
Given the challenges, Mosesmann maintains a Sell rating on INTC stock. Further, he lowered the price target to $20 from $30 following the Q3 conference call. Speaking on valuation, the analyst added that “We are applying a generous low-teens P/E multiple to our $1.70 FY2024 non-GAAP EPS estimate.”
This reflects a discount to Intel’s historical NTM (next 12-month) P/E, which the analyst believes is warranted given the ongoing challenges.
What is the Price Target for INTC?
Wall Street analysts’ average price target of $29.43 implies 7.45% upside potential in INTC stock. While the upside is limited in INCT stock, it has a Hold consensus rating on TipRanks based on four Buy, 16 Hold, and seven Sell recommendations.
Bottom Line
Intel stock hasn’t turned out to be a profitable investment. Further, the ongoing challenges, including the slowdown in demand, market share losses in the data center segment, and competitive pressure on pricing, will likely pose challenges for this chip maker in the coming quarters and could restrict the upside in its stock.
