Intel stock forecast: is Intel worth investing in?

Intel’s share price crashes as it misses predictions amid chip shortage

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Intel’s stock fell by 7.66% after releasing its third-quarter results after the technology giant missed analysts’ revenue prediction and revealed how the chip shortage had hurt sales.

Intel’s gross margin is also expected to fall as the company is in a period of mass capital spending while it shifts its business model to factory services for other chip designers.

Intel was founded in 1968 by engineers Gordon Moore and Robert Noyce. It is a technology company that mainly creates processor chips for computer manufacturers such as Lenovo and HP. Intel is currently the largest semiconductor chip manufacturer by revenue.

Mixed results amid chip shortage

Intel’s revenue was up 5% year on year, increasing from $17.3bn in Q3 2020 to $18.1bn this quarter. This missed analysts’ predictions.

Refinitiv’s aggregate of analysts’ forecasts expected revenue to be at $18.24bn, according to CNBC. However earnings per share (EPS) were up 59% year on year at $1.71, well above the $1.11 predicted by analysts polled by Refinitiv.

Net income was also up year on year by 60% at $6.8bn, but Intel’s operating margin fell from 27.6% in Q3 last year to 27.2% this quarter.

Although the results were not shockingly different from analysts’ predictions, the technology company has revealed the impact from global chip shortages.

Lower notebook volumes

The Client Computing Group (CCG), Intel’s PC chip business, was down 2% year on year. The company said it had experienced lower notebook volumes due to component shortages.

Pat Gelsinger, Intel’s chief executive, said: “Q3 shone an even greater spotlight on the global demand for semiconductors, where Intel has the unique breadth and scale to lead.”

Intel’s shift from designing to manufacturing chips is a business model that comes at a huge cost. Intel is building two chip factories in Arizona with a combined value of $20bn.

CNBC reported that investors are closely watching Intel’s gross margins, which are predicted to decrease from 57.8% this quarter to 53.5% in Q4.

The Q3 results revealed that the latest customers for its foundry service include Amazon, Qualcomm and the US government.

The Intel factory in Arizona
The new Intel factory in Arizona – Photo: Alamy

Gelsinger said: “We are still in the early stages of our journey, but I see the enormous opportunity ahead and I couldn’t be prouder of the progress we are making towards that opportunity.”

Intel experienced a strong boost from its Enterprise group, which recorded revenues at an all-time high. The Data Centre Group, which is involved with cloud and communication service providers, saw revenue up 10% year-on-year at $6.5bn. The Internet of Things Group experienced even stronger revenue growth with a 54% year-on-year increase and is currently bringing in $1bn.

Intel’s outlook for the next quarter is to reach $18.3bn revenue with $0.90 EPS. This is above CNBC analysts’ prediction of $18.24bn in revenue. The technology company’s predictions for the full year stand at $73.5bn in revenue and $5.28 EPS.

Intel's competitors

Intel is still market leading compared to its competitors. The American semiconductor company AMD saw Q2 revenue at $3.85bn, nowhere near Intel’s $18.5bn.

Unlike Intel, however, AMD is experiencing huge growth amid the chip shortage. Its Q2 results saw a doubling of turnover year on year, against Intel’s 2% rise. Whilst Intel’s operating margin decreased by 0.6 percentage points year on year, AMD’s increased by 12 percentage points.  

It was a similar story with American technology company Nvidia. Its $6.51bn in revenue did not come anywhere close to Intel’s Q2 revenue. But Nvidia experienced more growth, with revenue up 66% year on year.

What the markets did

The Intel stock price was on a bullish trend at the beginning of the year and reached $68.08 on 9 April, close to its all-time high of $68.44. However, Intel’s share price dropped to $57.48 on 27 April and continued to fall over the next six months.

On 20 October the Intel stock price was at $55.25 and dropped by 7.66% the following day to $51.02 when the results were released. Intel’s stock price fell even further on the 22 October to $50.10.

Intel stock forecast

The  Financial Times, when looking at the future of Intel’s share price, asked 39 analysts for their forecast. The analysts’ Intel stock prediction said over the next 12 months it could reach a high of $80, median of $60 and a low of $40; 12 of the analysts said the stock would overperform and 21 recommended holding the stock.

Similarly, CNN asked 34 analysts for their INTC stock forecast for the next 12 months. They predicted a high of $85, a median of $58 and a low of $40. Like the FT, most of the analysts recommended holding the stock.

WalletInvestor’s Intel share price forecast predicted it would reach $56 by the end of 2021 and a high of $57 next year. WalletInvestor described it as a “not so good long-term investment”. Its Intel price prediction for 2025 is $66.

FAQs

It might be. CNN and FT predict Intel’s share price could rise from around the $50 mark to $80. But both predict a possible low of $40. WalletInvestor forecasts a small rise in the share price to $58 in 2022. Remember, analysts can be wrong so always do your own research.

WalletInvestor forecasts Intel’s stock price to reach $66 in 2025.

It depends. Intel’s stock fell as it missed revenue predictions and was hit by the global chip shortage. CNN and the FT predict a potential high of $80 for the technology company’s share price over the next 12 months.

The views expressed in this article are those of the author and do not represent investment advice. Do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose.

Advanced Micro Devices Inc
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149.6
Low: 146.6
High: 151.19

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