With current headwinds plaguing various industries and the likelihood that chip giant Intel Corporation (INTC - Get Rating) will need to make huge investments in order to stay up to speed with current technology, the stock could be under pressure.

The company’s first-quarter results were impacted by an uncertain macroeconomic environment, with slowing consumer and enterprise demand, persistent inflation, and higher interest rates. The headwinds were believed to impact the company’s target markets and create a high level of uncertainty with its customers.

INTC’s CEO, Pat Gelsinger, stated that the company still has more work to do as it reestablishes process, product, and cost leadership but continues to provide proof points each quarter and remains committed to delivering long-term value for all its stakeholders.

With recent advancements in Artificial Intelligence (AI) transforming the sphere of technology, the company aims to truly democratize the incredible power of AI – championing an open ecosystem with a full suite of silicon and software IP to drive AI from cloud to enterprise, network, edge, and client across, training and inference, in both discrete and integrated solutions.

It continues to remain focused on the execution and the prioritization of the company’s owners’ capital toward its long-term goals.

However, INTC’s stock has fallen 8.7% over the past year and has gained 34.2% over the past nine months to close its last trading session at $33.98. On the other hand, Wall Street analysts expect the stock to hit $32.20 in the near term, indicating a potential downside of 5.5%. 

Here are some factors that could influence INTC’s performance in the upcoming months:

Mixed Financials  

For the fiscal first quarter that ended April 1, 2023, INTC’s total assets came in at $185.30 billion, compared to $182.10 for the fiscal period that ended December 31, 2022. However, its net revenue declined 36.2% year-over-year to $11.72 billion. In addition, its gross margin declined 56.6% year-over-year to $4.01 billion.

Mixed Profitability

In terms of the trailing-12-month EBITDA margin, INTC’s 17.47% is 104% higher than the industry average of 8.57%. Its 49.38% trailing-12-month CAPEX/Sales is significantly higher than the industry average of 2.32%. However, its negative 5.06% trailing-12-month net income margin compares to the 1.97% industry average.  

Mixed Valuation

In terms of non-GAAP forward P/E, INTC is trading at 81.69x, 243.5% higher than the industry average of 23.78x. Its forward EV/EBITDA multiple of 17.54 is 19.1% higher than the industry average of 14.73.

On the other hand, its forward Price/Sales ratio of 2.76x is 6.5% lower than the 2.95x industry average. INTC’s forward Price/Book multiple of 1.47 is 67.5% lower than the industry average of 4.54.

Mixed Analyst Estimates  

Its EPS for fiscal 2023 is expected to decline 77.4% year-over-year to $0.42, while for fiscal 2024, it is expected to increase 324.2% year-over-year to $1.76.

However, INTC’s EPS and revenue for the quarter ending December 31, 2023, are expected to increase 227.6% and 2.0% year-over-year to $0.33 and $14.33 billion, respectively. 

POWR Ratings

It’s no surprise that INTC has an overall C rating, equating to Neutral in our POWR Ratings systems. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.  

Our proprietary rating system also evaluates each stock based on eight distinct categories.  

INTC has a C grade for Value and Quality, justified by its mixed valuation and profitability. Within the Semiconductor & Wireless Chip industry, INTC is ranked #72 out of 92 stocks.    

Click here to access the additional ratings of INTC for Growth, Momentum, Stability, and Sentiment.

Bottom Line   

While INTC remains focused on driving execution excellence across process and product roadmaps and throughout the company, including a rigorous focus on efficiency and cost savings, given its mixed financial performance, mixed profitability scenario, and shaky financial estimates, it might be better to wait for a better entry point in the stock.

How Does Intel Corporation (INTC) Stack Up Against Its Peers?    

While INTC has an overall grade of C, equating to a Neutral rating, check out these other stocks within the Semiconductor & Wireless Chip industry with an A (Strong Buy) rating: Infineon Technologies AG (IFNNY - Get Rating), Renesas Electronics Corporation (RNECF - Get Rating) and Photronics, Inc. (PLAB - Get Rating).

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INTC shares were trading at $33.84 per share on Thursday afternoon, down $0.14 (-0.41%). Year-to-date, INTC has gained 30.13%, versus a 18.37% rise in the benchmark S&P 500 index during the same period.

About the Author: Malaika Alphonsus

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...

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