It May Take Some Time For The Market To Recognize That Intel Is Undervalued

Intel’s (NASDAQ:INTC) stock fell nearly -12% during the last 5 trading days, with the earnings release date accounting for the bulk of the drop. Why? It appears that the market considered tech giants unshakeable during the pandemic but that expectation did not completely hold up – as the data center business did not do as well as expected. Well, that’s in the past now. What to expect for the future? There are two ways to look at this. First, is the technical way. Looking at Intel’s stock’s behavior in the past, can we predict how it might move following this recent drop? Nothing is certain but a good way to do it is to play the odds! Our AI engine analyzed Intel’s past patterns, and suggests nearly a 48% probability of Intel dropping another 5% over the next 21 trading days. Compared to this, the probability of bouncing back 5% is 24%, implying that Intel is 2x more likely to drop by this amount than rebound. However, over the next 3 months, the chances of a 5% rebound increase to 33%, while that of decline decreases significantly. That’s useful information to adjust trades. Our detailed dashboard highlights the chances of Intel’ stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.

Second, is the fundamental way. What do Intel’s underlying financials, growth, and market performance suggest? It is clear that Intel is a cash generating profitable giant. And one cannot ignore the fact that despite revenue growth and sustained margins, the market has barely rewarded the stock in the last few years. There may be room for improvement going forward, but near term weakness is likely to persist. Our dashboard Big Movers: Intel Moved -11.7% – What Next? lays this out.

Intel’s stock price decreased -8.8% this year, from $59.85 to $54.58, before moving -11.7% last week, and ending at $48.20. For the full year, the stock is down nearly 20%. What about the last few years? Here are the numbers. Intel’s stock increased 29.7% between 2017 and 2019, but the bulk of that jump came in 2019. If we consider the period between 2017 and now, the overall increase has been barely 4.4% despite revenue growth, sustained margins, and limited impact of the pandemic. Intel’s revenue has increased 14.7% from $62,761 Mil in 2017 to $71,965 Mil in 2019. For the last 12 months, this figure stood at $78,955 Mil, implying further increase of 9.7% over 2019 numbers. In addition, net margins have hovered around 30% in the last 3 years. This certainly suggests that Intel’s stock has not yet received its due from the market, making it an interesting investment opportunity.

If you ignore the near-term weakness in the stock that we believe is likely, a long-term bet can be considered. But there are better investment options you can look at – such as this high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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