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Intel Fails to Find Traction Despite Recent Tech Stock Rally

Barchart - Wed Aug 17, 10:05AM CDT
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Intel (INTC), the world’s biggest maker of computer processors, is one of just six stocks in the Nasdaq 100 Index ($IUXX) (QQQ) whose shares have fallen since June 16. Meanwhile, the Nasdaq 100 has jumped 23% since mid-June as cheaper valuations and optimism that inflation is cooling have enticed investors to buy beaten-down tech stocks. 

The lagging performance of Intel shows investors have yet to buy into CEO Gelsinger’s effort to turn the company around.  After dominating the semiconductor industry for decades, Intel has lost its lead in semiconductor process technology, allowing Taiwan Semiconductor Manufacturing (TSM) to overtake it.  Intel’s CEO has pledged to restore Intel’s leadership and advanced production by spending billions of dollars on building new factories in the U.S. and Europe.

Intel’s reduced profit and revenue forecast in July also hampered the stock, although similar weak forecasts from Nvidia (NVDA) and Qualcomm (QCOM) haven’t stopped those stocks from rallying. Shares of both stocks have climbed more than 20% since mid-June.  Intel’s weak stock performance, however, shows investors realize that even if CEO Gelsinger’s turnaround plan is successful, it will take a long time.

Analysts cut Intel’s profit estimates after the company’s disappointing second-quarter earnings report last month.  Data from Bloomberg show that Intel’s 2023 earnings projections have fallen by 28% over the past month.  That compares with a drop of about 13% for semiconductor-related companies in the S&P 500 ($SPX) (SPY).

The lower profit outlook has made Intel more expensive relative to anticipated earnings.  At nearly 15 times profits over the next 12 months, Intel is priced near the highest in the past ten years.  With Intel's bleeding market share with products built on old manufacturing technology, there may be more disappointing earnings reports in the interim.  Until Intel can sort out these issues, growth will be hard to come by.

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Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.