INTC Stock: Buy Intel Stock on This Dip Because It’s Intel

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The past month, give or take, has been a miserable one for Intel (NASDAQ:INTC) shareholders. After racing to record highs earlier in the year and seemingly shrugging off last year’s bevy of bad news, the Intel stock price peaked at $59.59 in mid-April. However, it has fallen back to a low of $42.86 on Thursday of last week.

INTC Stock: Buy Intel Stock on This Dip Because It's Intel

It was arguably a well-deserved setback. Between the rekindling of forgotten rival Advanced Micro Devices (NASDAQ:AMD), an uncomfortable number of newly uncovered security flaws in its older processors and a spate of delays on the 10-nanometer front, the recent strength of INTC stock never quite felt rock-solid.

Clearly it wasn’t.

The flipside: The 27% tumble since last month’s high also looks and feels overdone. Savvy investors may want to use the pullback as a buying opportunity. The company may have its problems, but this is INTC stock for cryin’ out loud.

Sentiment for INTC Stock Hits Rock Bottom

Bluntly, Intel got caught with its proverbial pants down. Once the powerhouse name in microchips, the tech giant got lazy and sloppy. It took for granted that it would maintain its PC dominance forever.

It didn’t.

Actually, it technically did. Intel still controls roughly 77% of the CPU market versus AMD’s 23%.

AMD is gaining ground though, particularly within PCs. And Intel remains somewhat of a no-show on mobile, largely ceding control of the processor market to Nvidia (NASDAQ:NVDA). INTC made two mistakes here: it failed to capitalize on mobile in its infancy, and it’s now divesting its compelling wireless-broadband modems.

Intel finally got its much-needed wake-up call last year though, forcing the chipmaker to regroup and rethink. The overhauled company unveiled its new and improved self in early May at its analyst day event.

Investors and analysts were underwhelmed. Indeed, despite months’ worth of rebuilding being turned into a viable (even if slow) revitalization plan, BMO Capital Markets analyst Ambrish Srivastava wasted no time at all downgrading Intel stock coming out of the meeting. He opined at the time:

“AMD is having an impact on the business, and it has barely begun shipping its server products, and will likely have a bigger impact than clearly we thought on Intel’s margin structure – and likely what Intel thought as well.”

Fair enough.

Investors may want to take a closer, thoughtful look at the three-year roadmap Intel laid out earlier this month, though. Adhering to its plan will be challenging to be sure, but it’s not out of reach. It could even prove catalytic. After all, INTC stock is only priced 10 times its trailing earnings, and less than 10 times its projected income.

It’s got a couple of aces in the hole too.

Looking at the Roadmap Ahead

Above all else, Intel needs to win on the server front. This entails capturing more cloud, data center and mobile-minded revenue as the market continues to expand. Server-related business accounts for roughly half of the company’s revenue right now. Still, it’s arguably a bigger growth opportunity than personal computing.

However, don’t dismiss Intel stock because of its PC exposure. True, some analysts decry the company’s growth plans for its Sapphire Rapids and Granite Rapids Xeon server CPUs as “aggressive.” Yet staying on its schedule for launch in the second quarter of 2020 is a viable defense. Intel must respond against an AMD that’s slowly creeping into the server and data-center market.

INTC isn’t ignoring consumers though. Its so-called Project Athena sets the tone for next-generation mobile devices. Athena features artificial intelligence, amazing battery life and 5G connectivity, where it’s still early in the game. Even without specifics, the Athena initiative looks like it’s going to reshape the laptop landscape. This is occurring at a time when even the laptops updated with a free upgrade to Windows 10 will finally be past their useful life.

Then there’s Mobileye, the acquisition Intel made in 2017 that got it waist-deep into the autonomous vehicle race. Though it only drove a little over $200 million worth of revenue last quarter, that figure was up 38% year-over-year as the entire self-driving and driver-assist movement starts to reach critical mass. As of early last year, Mobileye controlled 70% of the autonomous driving market. That’s a bonus most stakeholders don’t know about or appreciate.

Bottom Line for Intel Stock

The next three years will still be tough ones for the company. It’s also risky for anyone daring enough to step into a position in Intel stock.

Management knows it must execute on its game plan. Still, analysts project revenue growth will only hit low single digits, while profit margins may continue to sink. It’s a recipe Bernstein Research analyst Stacy Rasgon fears could weigh on Intel stock despite some positive signs. “While we do not necessarily disagree with the path they are setting themselves on,” she explains, “it may prove to be a tough one for investors while they traverse it.”

Broadly speaking, though, a high-profile name like Intel will likely attract positive sentiment for its longer-term potential. That’s especially true once the bad news fades into the rear-view mirror.

Indeed, though a selloff may have been what INTC stock deserved, a handful of professionals and amateurs alike are starting to believe the bears overshot their target. Even a troubled INTC stock is still Intel.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.

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