Semiconductor giant Intel (INTC) stock has been flat in the last 18 months. The stock rose marginally by 1% last year and has gained 0.6% in 2019. The stock though has declined 21% since April 24 this year and fell 8% so far in May 2019.
The recent tweet by President Donald Trump regarding an increase in the tariff on Chinese goods also pressurized Intel’s stock. Intel generates 27% of sales from China, and revenue will be affected if the trade war further escalates.
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In the last couple of quarters, chipmakers such as Intel and NVIDIA (NVDA) have openly warned investors about the negative impact of prolonged US-China trade tensions. Intel stock fell over 5% on May 9, while peers Advanced Micro Devices (AMD) and NVIDIA (NVDA) generated returns of 0.1% and 2.2%, respectively, on May 9.
Is Intel stock undervalued?
Wall Street expects Intel’s sales to fall 3.1% in 2019 and then grow by 4.4% in 2020. In comparison, the company’s EPS are estimated to fall 6.3% in 2019 and rise 6.6% in 2020. Intel’s EPS are expected to rise at a CAGR of 7.6% in the next five years. Intel has a forward PE multiple of 10.9x in 2019. So does it make sense to pay 11x for a -6% earnings fall next year?
Analyst price target
Of the 41 analysts covering Intel, 23 have given it “buy” recommendations, 13 have given it “hold” recommendations, and five have given it “sell” recommendations. The average 12-month target price for Intel is $53.71, which indicates a potential upside of 15% from its current level.