There’s a comeback story underway right now. Intel (NASDAQ:INTC) stock made a big after-hours move, and I am bullish on the stock because this once-hated chipmaker is improving its financials while capitalizing on the AI trend.
Intel is among the world’s most famous semiconductor manufacturers, but even a tech giant like Intel is bound to fall out of favor sometimes. That’s what happened in 2021 and 2022, as the company lost market share to Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA).
Then, INTC stock fell fast, and the sell-off accelerated as the company reported a negative-EPS quarter in Q1 of this year. That was shocking, and so was Intel’s severe dividend cut. Is it possible for Intel to regain favor among investors and analysts now? Not only is it possible, but it’s actually happening, and you can join the comeback celebration with Intel.
Is Intel Delivering AI-Compatible Technology?
Before we get to Intel’s excellent quarterly results, to be fair and balanced, I must report something that a company insider told Barron’s. Reportedly, CFO David Zinsner acknowledged that there is some “wallet shift” going on from Intel to its rivals (such as Nvidia) for those rivals’ graphics processing unit (GPU) chips for AI applications. This admission might concern some investors because the CFO is revealing that companies like Nvidia are outpacing Intel in certain AI hardware niche markets.
This doesn’t mean, however, that Intel is left out of the AI arms race entirely. Zinsner assured that Intel could benefit from additional demand for the company’s AI chips as well as for Intel’s data center processors. Plus, in Intel’s quarterly report, the company noted the recognition of its “AI acceleration capabilities” through “third-party validation.”
Here’s where it gets complicated, though. During this year’s second quarter, Intel’s Data Center and AI (DCAI) business unit revenue declined 15% year-over-year. There’s no breakdown in the press release specifying how much Intel’s AI business is responsible for that decline. Still, for what it’s worth, CEO Pat Gelsinger made sure to emphasize that Intel is “well-positioned to capitalize on the significant growth across the AI continuum.”
Intel is Back in the Green in Q2
As I mentioned earlier, it was shocking to see the mighty Intel report a negative-EPS quarter earlier this year. For Q2, however, Intel was back in the green with a profitable quarter that exceeded Wall Street’s expectations.
The losing streak is now over, as Intel announced second-quarter EPS of $0.13 even though analysts had predicted that the company would lose $0.04 per share. At the same time, Intel’s revenue fell 15.7% year-over-year to $12.9 billion. This might sound like bad news, but Intel easily beat the consensus estimate by over $800 million.
What about the company’s current-quarter guidance? There’s positive news here, as well. Intel expects to generate third-quarter revenue of $12.9 billion to $13.9 billion. The midpoint of this range is higher than the consensus estimate of $13.2 billion in Q3 revenue. Additionally, Intel guided for $0.20 in third-quarter EPS, above Wall Street’s call for $0.17.
Now, Intel has to live up to its current-quarter expectations, and that’s a tall order. Still, the optimistic guidance suggests that Intel’s management is confident – and maybe, this means investors and analysts should be confident about Intel, as well.
Is INTC Stock a Buy, According to Analysts?
Speaking of analysts, TipRanks’ consensus for INTC stock shows that it is currently considered to be a Hold based on two Buys, 18 Holds, and five Sell ratings. The average Intel stock price target is $31.61, implying 8.5% downside potential. Don’t be surprised, though, if these numbers start to improve in the coming days as Wall Street re-assesses Intel’s future prospects.
Conclusion: Should You Consider Intel Stock?
As a contrarian, I liked Intel when many people hated the company. Now, I suspect that the tide of sentiment will turn back in Intel’s favor, and the share price will likely return to $40, $50, and even higher.
That’s not a guarantee, but the risk-to-reward balance for Intel stock looks highly favorable in light of the company’s positive results and guidance. So, I definitely believe that you should consider the stock, as Intel’s comeback story is probably just getting started.
