Intel Stock Price Forecast October 2021 – Time to Buy INTC Stock?

Intel (INTC) stock was trading almost 9% lower in US premarket price action after markets gave a thumbs down to its third-quarter earnings. The stock was anyways underperforming the S&P 500 this year and the gap looks set to widen further.

INTC stock is now down over 18% from its 52-week lows. Looking at the pre-market carnage, it looks set to enter into a bear market territory, which is defined as a stock falling 20% or more from the highs. What’s the forecast for Intel stock and should you buy the beaten-down chipmaker?

INTC stock technical analysis

Intel stock had started to look attractive on the charts after it crossed above the 50-day SMA (simple moving average) earlier this month. Looking at the momentum, it was looking set to cross above the 200-day SMA also, which would have been another bullish sign. However, if the pre-market price action holds in the regular trading also, INTC would fall below the 50-day and 100-day SMA. It would also fall below the 10-day, 20-day, and 30-day SMA.

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Intel 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%.

Intel’s Internet of Things Group business segment posted record revenues while the Data Center Group and Mobileye verticals reported record third-quarter revenues. However, the company’s Cloud Computing Group, which is the largest business segment reported a 2% fall in revenues.

Key takeaways from INTC earnings

Overall, Intel’s earnings look quite decent. However, the stock was down sharply in premarkets. One reason could be that markets are apprehensive about the outlook considering the parts shortage situation.

“We call it match sets, where we may have the CPU, but you don’t have the LCD, or you don’t have the Wi-Fi. Data centers are particularly struggling with some of the power chips and some of the networking or ethernet chips,” said INTL CEO Pat Gelsinger.

There are concerns over gross margins considering the massive investments that Intel is making. This year only, the company is spending $20 billion towards new plants, including in the US. Meanwhile, Intel tried to allay fears of gross margin contraction. “For gross margin, with the impact of our investment in capacity and the acceleration of our process technology, we expect gross margins between 51 and 53% over the next two to three years before moving upward,” said INTC CFO George Davis. Davis is set to retire in May 2022.

Intel stock forecast

The forecast for Intel stock looks positive and if the company’s pivot towards contract manufacturing succeeds, it would add long-term values. While there are fears of chip oversupply over the next couple of years, the digital transformation would help support the long-term chip demand.

Of the 40 analysts polled by CNN Business, 15 rate INTC as a buy or some equivalent. 15 analysts have a hold rating while the remaining ten analysts rate it as a sell. The stock has a median target price of $60 which is a premium of 17.1% over current prices. The stock’s highest target price of $85 is a premium of 65.9% while the street low target price of $40 is a discount of 21.9%.

INTC 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.”

Should you buy Intel 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 13.5x. The multiples have averaged 12.6x, 12x, and 12.4x over the last one year, three year, and five-year periods. The current valuations are largely in line with the historical averages. The stock has a dividend yield of 2.5% which looks attractive.

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