Intel stock currently trades at $40 per share, which is a significant 42% below the levels seen on April 9, 2021. The demand for Intel products, such as PCs and laptops, decreased post-Covid-19 lockdowns as the remote working trend eased. Additionally, the increasing use of graphics processors (GPUs) could threaten Intel as these chips are becoming more essential for artificial intelligence-related workloads. Despite these challenges, Intel stock has seen a 54% recovery from a low of $25 in October 2022, driven by signs that the PC market could be picking up. IDC forecasts global PC shipments to reach 265.4 million units in 2024, up 2% from the previous year.
To return to pre-inflation shock levels, Intel stock would need to gain about 72% from its current price. Intel’s valuation is estimated to be around $41 per share, only slightly above the current market price. Despite facing challenges in its foundry space, with an operating loss of $7 billion in 2023, Intel has a significant opportunity to produce chips for third-party vendors. The company does not expect to break even until 2027, but there is potential for growth post-inflation shock, taking into account the performance of the stock during turbulent market conditions in 2022.
The 2022 inflation shock timeline shows a series of events leading to high inflation rates, with the S&P 500 index declining more than 20% from peak levels. The Federal Reserve’s aggressive interest rate hikes resulted in market fluctuations, although there were periods of recovery. Comparatively, during the 2007/2008 crisis, Intel stock declined significantly but recovered post-crisis. Intel’s revenues rose through the early phase of the Covid-19 pandemic but declined in 2022 and 2023, impacting earnings. Despite the decline in sales, Intel appears to have a healthy financial position with sufficient cash to meet its obligations.
Looking at Intel’s performance during the 2007/2008 crisis, the stock declined but eventually recovered. Intel’s fundamentals show a rise in revenues during the early phase of the pandemic, followed by a decline in sales and earnings over the past few years. The company’s total debt has increased, but it also has a healthy cash position to meet its near-term obligations. While Intel stock could potentially benefit from easing inflation and the Fed’s indication of possible interest rate cuts, competition in the CPU market and the rise of GPUs could limit its upside potential moving forward.
In conclusion, Intel stock has faced challenges in recent years due to shifts in demand and competition in the market. However, there is potential for growth post-inflation shock, with opportunities in the foundry space and a healthy financial position to meet obligations. Keeping an eye on market trends and competition will be crucial for Intel as it navigates the changing landscape of the tech industry.
