Intel ( INTC -3.81% ) The tech company was already experiencing a challenging year prior to releasing its earnings last week. Following the publication of the financial results, the stock experienced a further significant decline. Currently, the company’s shares have plummeted by over 60% since the beginning of the year.
The stock is currently at its lowest levels in over ten years and recently experienced its worst market performance in half a century. Despite the risks associated with investing in this stock, is it now priced so attractively that it shouldn’t be ignored?
What are the issues that Intel is facing?
Intel has been focusing on expanding its foundry division to address a significant demand in the United States for a reliable local chip manufacturer, rather than depending on international suppliers. However, the journey has been challenging for the company and its investors.
The company released its financial outcomes for the quarter ending on June 29, which were disappointing in terms of revenue and profit. Intel’s earnings reached $12.8 billion during this period, showing a 1% decrease compared to the same period last year. The most concerning aspect was the significant operating loss of nearly $2 billion, almost twice the loss from the previous year. This decline in profit was mainly attributed to a rise of over $740 million in restructuring and other expenses incurred by Intel.
To enhance its financial situation, Intel is downsizing its workforce by 15% and is enacting significant cost-cutting measures to save $10 billion in expenses by 2025. Additionally, the company has declared the suspension of its dividend.
Is Intel stock now a bargain purchase?
Intel’s shares are currently being bought and sold at a certain price on the stock market. The ratio of a company’s market value to its book value. With a price-to-earnings ratio below 0.8 and a price-to-revenue multiple of 1.6, the stock is considered to have modest valuations. Nevertheless, analyst projections indicate that the stock is currently valued at 34 times its anticipated future earnings, which is relatively high compared to the average. S&P 500 The stock is trading at a multiple of 22.
The price targets set by Wall Street analysts for the tech stock have been reduced, but most of them are still above its current trading price. The average price target among analysts is around $33, suggesting a potential increase of over 66% for investors purchasing the stock now. Although this doesn’t guarantee that the stock will deliver such returns, it does highlight the possibility of it being undervalued in the near future. Typically, analyst price targets focus on the stock’s potential performance over the next 12 months.
Although Intel’s stock may seem affordable, there is a risk that it could ultimately turn out to be a costly investment. value trap The company is beginning an ambitious plan to transform its business and reduce expenses. Investors should be cautious as the outcome of this strategy is uncertain, and they may need to request a high return. Safety margin Given this stock, it is reasonable to anticipate a discount.
Is it a good idea to put your money into Intel?
Investing in Intel’s stock can be risky as the company faces challenges in achieving growth, developing a competitive foundry business, and remaining profitable. Given these obstacles, I am hesitant to recommend purchasing Intel shares at this time.
Investors who are willing to take risks and have a contrarian approach may find the stock to be a promising long-term investment, but they must be prepared to wait patiently. It is advisable for most investors to consider other options instead. growth stocks instead.
