We Rate Intel Stock At Accumulate Because It’s Not About The Numbers

Numbers Don’t Matter Tonight – They Sure Didn’t Matter Yesterday

Our working hypothesis on Intel Corporation (NASDAQ:INTC) stock is that the fundamentals are almost irrelevant at this point. The U.S. and China are locked in a dance as regards the semiconductor industry. The players are the U.S. and Chinese governments; Intel; Taiwan Semiconductor (TSM) (“TSMC”); and a host of suppliers to the industry, from Tokyo Electron (OTCPK:TOELF) through ASML Holding N.V. (ASML) and beyond.

The U.S. is conducting an aggressive trade war vs China using a range of non-tariff barriers, culminating in national security restrictions on exports to China. You can form your own view on the politics thereof – that’s not our concern here. Our concern here is what does it mean for the semiconductor stocks we cover.

We think the main impact will be what appears to be irrational strength in the U.S. national champion names. The Boeing Company (BA) shows you how this can work. If you read our coverage of Boeing in the last year or so, you’ll know that we’ve said, fundamentals awful, doesn’t matter, stock likely to go up anyway. Which it has. At Boeing, the fundamentals are now improving, and that can now be the narrative behind any further rises in the stock price.

Intel just reported a spectacularly terrible Q4 2022 and declined to provide guidance beyond Q1 this year. Since we are already 1/3 of the way through Q1, Intel Corporation appears to be saying they have no clue what may happen in two months’ time. Unbelievable. This is not in the midst of a macro crisis or a recession, but in a period where GDP is up by a shade under 3%. So, either Intel is very badly managed, or they are losing share, or chip buyers continue to unwind inventory gathered during the supply chain shock, or something else. Anyway – a dreadful quarter.

In staff personal accounts, we have Intel as a long-term hold, and we added to positions today in the wake of this earnings report. Here’s the chart logic.

Intel stock dropped so much from its March 2021 double-top that it didn’t find support until it hit the .786 retracement of the whole move up since the 2009 financial crisis low. (You can open a full-page chart, here).

Right now, the risk/reward of a long position in INTC looks attractive to us. You can place stops a little below that .786 level, as we show above, and try to ride the stock to the upside to see if the MAGA theme plays out. Risk management will be key. If the stock moves into a profitable position, consider using trailing stops to lock in gains in the face of further volatility.

For what it’s worth, here are the numbers.

And the valuation metrics:

Accumulate rating, for the reasons above.

Cestrian Capital Research, Inc – 27 January 2023.