Intel (NASDAQ:INTC) is currently facing significant challenges, which have taken a substantial toll on its stock. The chip giant saw its shares plunge by 26% in a single session after releasing its Q2 results earlier this month, deepening its year-to-date losses to a staggering 57%.
Given this steep decline, some may wonder if it’s the right time to capitalize on what appears to be a bargain. However, investor Gytis Zizys remains skeptical.
“I’m still not convinced,” he remarks, believing that the company’s share price “will not recover any time soon.” As such, Zizys is in “no rush to start a position here.”
Intel’s recent Q2 earnings report was a disaster from top to bottom, with both revenue and the profit profile missing expectations. Add to that a pretty horrid outlook, and that massive share price drop is easy to understand.
Faced with challenges in the AI PC market and increasing competition from peers such as Qualcomm and Nvidia, revenue growth has been off the menu. Margins have also suffered badly, and while planned layoffs are anticipated to save $10 billion by 2025, there’s still a “long road ahead for Intel to recover profitability.”
Intel has set its sights on becoming the world’s second-biggest foundry by 2030, with its custom chip business playing a crucial role in this strategy. Yet, while some investors may be banking on this vision, Zizys has doubts about it driving revenue growth in the near future, especially given the intense competition from powerhouse Taiwan Semiconductor.
All in, Zizys makes the case that Intel could be a lesson in learning not to rest on your laurels. “Other players came along, while Intel was enjoying its dominance a decade ago, maybe ignoring the competition and thinking it will continue to be the best,” he explained. “The competition caught Intel slacking and took advantage, and now the former king is playing catch up in many of the categories, and it will take a long time.”
Accordingly, Zizys remains cautious about Intel’s prospects, rating its shares a Hold (i.e., Neutral). (To watch Zizys’ track record, click here)
This sentiment is echoed by the analyst consensus, which is based on a mix of 24 Holds, 5 Sells, and 1 Buy. However, many analysts believe the stock may have dropped too far. The $27.80 average price target suggests a potential one-year upside of ~30%. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
