INTC Stock Analysis: Intel Shares Are on Sale. Should You Buy?

Intel (NASDAQ:INTC) has been struggling with innovation and competition because of its outdated designs and high costs. This made the stock look less attractive. However, geopolitical developments and various growth projects have made the stock a long-term bet worth making for certain investors. That’s particularly true given that INTC stock is nearing its 52-week low. So, it makes this stock an attractive pick for those with a value-first mindset.

Intel’s recent downtrend has been a function of a number of key headings. Obvious tight competition in the chip market is one key issue investors are facing right now. True, Intel is a key beneficiary of the $8.5 billion CHIPS Act enacted by the U.S. government. Yet, it’s going to take years for new production capacity to be brought online. Right now, it’s unclear whether these chips will be built in the U.S. soon enough or not.

Let’s dive into whether Intel makes sense as a long-term holding right now.

New Foundry Manufacturing and Supply Chain Lead

A notable recent development was the appointment of Dr. Naga Chandrasekaran as Intel’s next lead in its Foundry Manufacturing and Supply Chain segment. Chandrasekaran was formerly Micron’s (NASDAQ:MU) senior Vice President of Technology Development.  Esfarjani, who retires after nearly 30 years, will stay until year-end for a smooth transition.

Dr. Naga Chandrasekaran will join Intel on August 12 to oversee global manufacturing and supply chain for Intel Foundry. Reporting to Chief Executive Officer Pat Gelsinger, Chandrasekaran, formerly of Micron, brings over 20 years of experience in semiconductor technology and development. His expertise in scaling memory technologies and advanced packaging will support Intel’s goals in building a resilient semiconductor supply chain and pioneering AI systems.

Chandrasekaran holds degrees in mechanical engineering from the University of Madras and Oklahoma State University, an information and data science degree from UC Berkeley, and dual executive MBAs from UCLA and the National University of Singapore. At Intel, he will oversee the Foundry business, integrating technology development, global manufacturing and customer service to support AI-driven chip design and manufacturing.

INTC is Overvalued

Intel has recently underperformed other chip giants, losing ground to rivals like AMD (NASDAQ:AMD) and facing threats from ARM-based chips. Despite its historic leadership, Intel’s dominance in the CPU market is diminishing. And this is impacting its profit margins and market control. Intel’s IDM 2.0 strategy aims to restore its manufacturing edge. But it is facing delays and cost overruns, leading to rising operational losses.

Moreover, INTC stock dropped 3% over the past year due to poor earnings and fierce competition. Despite a 9% revenue increase and reduced losses in Q1 of fiscal year 2024, lower Q2 revenue guidance and a 10% drop in foundry revenue led to a 9% post-earnings decline. Intel’s P/E ratio of 30.36 exceeds the sector average of 24.34, indicating overvaluation.

Is INTC Stock a Buy?

Intel’s shares fell 41% since 2021, while AMD’s rose 51%. Although the company saw some hurdles along the way, Intel shifted its focus on artificial intelligence and manufacturing. The company is focused on creating new AI chips and expanding through opening new U.S. chip factories. Also, Intel has welcomed new clients for its AI products and introduced Xeon 6, Gaudi 3 and Lunar Lake chips.

Focusing on expanding its foundry capacity, Intel is seen as more stable than AMD amid U.S.-China tensions affecting chipmakers. Intel’s stock has risen with its plans to build domestic chip fabs. 

Although these facilities will take more time to be operational, they are expected to improve Intel’s AI prospects. Moreover, the company expects to reach over 60% gross margins and 40% for operating margins this year.

In my view, Intel is a difficult stock to peg down as either a value play or potentially a value trap right now. Therefore, the stock is one that may be best waiting on the sidelines with, at least for now.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.