Analyzing Intel Stock’s Target Price and Valuation

Intel (INTC) stock rose 1.78% on Friday and closed at $50.92, 14.5% below its 52-week high of $59.59, and 20.2% above the 52-week low of $42.36. At Friday’s closing price, Intel had a market capitalization of $225.6 billion.

Up just 10.6% year-to-date, Intel stock has largely underperformed the broader market and semiconductor peers. This year, NVIDIA (NVDA), Advanced Micro Devices (AMD), and Micron (MU) have returned 36.6%, 57.2%, and 40.4%, respectively. Meanwhile, the VanEck Vectors Semiconductor ETF (SMH) has risen 37.8%, and the S&P 500 has risen 17.8%.

Analysts’ recommendations and target price

Of the 42 analysts covering Intel stock, 11 suggest “buy,” and 22 suggest “hold,” compared with 12 and 21, respectively, last month. Nine analysts suggest “sell,” the same as last month. Their 12-month target price of $53.13 for INTL stock implied a 4.2% upside based on its October 4 price. Their median target price was $53.50.

Technical level

With a 14-day RSI (relative strength index) score of 53.76, INTL stock is in neutral territory. An RSI score above 70 indicates a stock is overbought, while a score below 30 suggests it’s oversold. On October 4, Intel stock closed near its midrange Bollinger Band of $51.30, also suggesting it’s neither overbought nor oversold.

Intel stock’s valuation

In the third quarter, Intel expects its sales to fall 6% YoY (year-over-year) to $18 billion, and its EPS to fall 11.7% YoY to $1.24. This year, the company expects its revenue to fall 2% YoY to $69.5 billion.

With a PE ratio of 11.6x for this year and analysts forecasting the company’s earnings to fall 4.15%, the stock looks expensive. Next year, analysts expect the company’s earnings and sales to grow 1.4% and 2.33%, respectively.

What’s affecting Intel stock?

Intel, once the data center processor market’s leader, started losing its sheen in October 2018 because of supply issues related to its 10nm (nanometer) processor chips. Intel couldn’t meet customer demand for PC chips due to its supply shortage, hurting its revenue and reducing its PC market share. During Q2, Intel’s revenue fell 3% YoY. Although Intel expects to meet demand in this year’s second half, its sales growth could stay sluggish.

The ongoing US-China trade war and slow macroeconomic environment have also impacted the leading chipmaker. China, Intel’s biggest market, generated around 26.6% of the company’s revenue last year. The expectation of the US and China reaching a trade deal could boost INTL stock.

Competition hitting Intel stock

Intel is facing competition from AMD and NVIDIA in the CPU (central processing unit) and fast-growing AI spaces, respectively. Both companies are struggling to boost their data center business.

Intel started shipping its 10nm Ice Lake CPUs for laptops in the second quarter. However, AMD’s 7nm EPYC Rome server processor launch in early August was a big win over Intel. To gain market share, Intel has recently slashed prices for its Cascade Lake-X high-end desktop processors.

Intel launched Cascade Lake-X today, and AMD’s Ryzen Threadripper processors are set to launch in November. Reportedly, the Threadripper processors are going to be cheaper than Intel’s i9 processors. Intel also plans to launch its Cooper Lake Xeons in next year’s first half. Though both AMD and Intel are striving for more CPU market share, AMD may have the upper hand.

Correction: An earlier version of this article said Intel’s Cascade Lake-X was to be launched in November.