Intel Stock Price Up 5% Today– Time to Buy INTC Stock?

Intel (INTC) stock was trading sharply higher in early price action today after the company announced that it would list Mobileye, its self-driving unit. What’s the forecast for the stock and is it a good buy in December 2021?

Prior to today, Intel stock was down over 25% from its 52-week highs and was in a bear market territory. The stock is barely positive for the year and is underperforming the markets by a wide margin. The company has been hit by the global chip shortage, which it expects would extend to 2023 as well.

Intel stock recent developments

In 2017, Intel had acquired Mobileye for $15.3 billion. Now, it intends to list the business at a reported valuation of over $50 billion. Markets seem impressed with the value unlocking and have sent Intel stock north today. Commenting on the transaction, Intel CEO Pat Gelsinger said “Intel’s acquisition of Mobileye has been a great success. Mobileye has achieved record revenue year-over-year with 2021 gains expected to be more than 40 percent higher than 2020, highlighting the powerful benefits to both companies of our ongoing partnership.”

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Mobileye IPO

According to Gelsinger, he and Mobileye head Prof. Amnon Shashua “determined that an IPO provides the best opportunity to build on Mobileye’s track record for innovation and unlock value for shareholders.

Notably, Intel would hold the majority stake in Mobileye even after the IPO. The outlook for self-driving companies is positive and autonomous driving and zero-emission vehicles are the two key themes in the global automotive industry. Intel and Mobileye would “continue as strategic partners, collaborating on projects as they pursue the growth of computing in the automotive sector.”

In its release, Intel said that by the end of this decade, semiconductors would account for a fifth of a premium vehicle’s total bill-of-materials. To be sure, the usage of chips has gradually been increasing in the automotive industry as cars have become smarter than ever. No wonder, the global automotive industry has been among the worst hit by the global chip shortage and is estimated to lose billions of dollars in sales this year due to the chip shortage.

Intel third-quarter earnings

Intel’s third-quarter earnings were a mixed bag. While its adjusted revenues of $18.1 billion fell short of analysts’ estimates of $18.24 billion, its adjusted EPS of $1.71 shattered the estimates of $1.11. The company guided for adjusted revenues of $18.3 billion in the fourth quarter which was also slightly ahead of the $18.24 billion that analysts were expecting. It also raised its full-year adjusted EPS guidance to $5.28 and adjusted gross profit margin guidance to 57%. However, markets were concerned with the increased spending which would take a toll on the company’s margins.

INTC stock forecast

Wall Street analysts have a consensus hold rating on Intel stock. Of the 41 analysts polled by CNN Business, 11 rate INTC as a buy or some equivalent. 21 analysts have a hold rating while the remaining nine analysts rate it as a sell. The stock has a median target price of $55 which is a premium of 7.8% over current prices. The stock’s highest target price of $80 is a premium of 56.9% while the street low target price of $40 is a discount of 21.6%.

After Intel’s third-quarter earnings release, several brokerages had lowered their target prices. Mizuho, UBS, and Morgan Stanley downgraded the stock.

“We have been positive on INTC’s ability to return to executing on its technology roadmap with new management. However, we now believe INTC’s capital intensive Foundry shift adds uncertainty to its likelihood of catching up to leading-edge by executing on its core PC/Server roadmap,” said Mizuho analyst Vijay Rakesh while lowering the stock’s target price from $70 to $55.

Intel stock long term forecast

Intel is working on a long-term growth strategy called IDM 2.0 under the leadership of Gelsinger. During the earnings call, he said “We are repositioning Intel for growth to be a long-term growth company.” Gelsinger added, “Near-term, we could have chosen a more conservative route with modestly better financials, but instead the board, the management team — and this is why I came back to the company — choosing to invest to maximize the long-range business that we have.”

To be sure, Wall Street analysts also buy into the long-term growth story.  Morgan Stanley analyst Joseph Moore said, “We remain believers in the longer term turnaround in the core business, but with this level of investment that may not be enough to drive the stock to the highs we had envisioned.”

UBS believes that the higher capex would take a toll on the company’s cash flows and downgraded the stock to a neutral while lowering its target price from $73 to $58.

Intel stock technical analysis

Intel stock has crossed above the 50-day and 100-day SMA (simple moving average) in today’s price action. The 50-day SMA has been a strong resistance for the stock. If INTC stock can also cross above the 200-day SMA, which is currently at $56.06, it could signal a technical uptrend.

Should you buy INTC stock?

Intel stock looks like a good buy at these prices. While there are short-term headwinds amid the parts shortage, the long-term growth outlook looks reasonably strong. Intel stock trades at an NTM (next-12 months) PE multiple of 14.1x. The multiples have averaged 13x, 12.2x, and 12.4x over the last one year, three year, and five-year periods.

Intel’s dividend yield of 2.7% is also attractive and is about twice that of the S&P 500’s dividend yield. Intel is a play on the turnaround in the business under Gelsinger. The IPO of Mobileye is a step in the right direction and would help in better value unlocking for the self-driving business. The stock looks like a good buy at these prices and the listing of Mobileye would further help investors through effective price discovery of the business.

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