There was once a time when chip maker Intel (NASDAQ:INTC) was the absolute king of processors, especially for the home PC market and anyone who ran their business essentially on the same kind of PC that might be used at home. But major shifts in the market have left Intel somewhat on the back foot, and now, Intel has to face down a range of competitors that it never really had to take on before. The question is, though, is there a path to victory for Intel here?
It Ain’t as Good as It Once Was…
Intel was once at the top of the heap. It’s still got a lot of market potency; after all, it’s still the go-to for many PC builds out there, though it’s lost some ground to AMD (NASDAQ:AMD) in the meantime. And it’s still a major part of gaming, though it’s functionally lost the graphics card market to Nvidia (NASDAQ:NVDA).
But we’re already seeing some cracks emerge here, too. An ongoing issue in some of Intel’s highest-end gaming processors has left games freezing up, and left gamers boiling mad in response. Even if Intel can fix the problem soon—it’s made moves in that direction but still hasn’t completely pulled off the job—it’s still done quite a bit of damage to its fantastic name recognition.
But that’s not all; Intel has also been kind of a laggard when it comes to newer use cases, like artificial intelligence (AI), cloud operations, servers, and the like. It’s done some things in those veins, certainly, but it’s heard about much less often than many of its competitors are. And one of Intel’s biggest ambitions—its foundry applications—is proving to be a bit more of a challenge than expected.
A class-action lawsuit filed by Levi & Korsinsky notes that Intel “…misrepresent(ed)…financial results of its foundry.” Though production is ramping up—its recent deal with Sharp (OTHEROTC:SHCAY) will add capacity—the problem seems to be finding people willing to buy the chips that roll off the line.
The Path to Victory: More Customers
The good news here is that Intel has made some strides in attracting new customers. It recently rolled out the OLEA U310, a system on a chip (SoC) that will be put to work in electric vehicles to reduce their prices overall by making them less expensive to build. Of course, you wouldn’t be wrong in wondering if Intel is chasing the wrong market at this point. After all, aren’t electric vehicle sales in decline? They are, of course. But one of the biggest reasons why they’re in decline is that they’re far more expensive than their internal combustion counterparts.
If you can reduce the costs to build an electric vehicle, then you can also reduce the price to sell them. And cheaper electric vehicles will likely have a lot more market interest than expensive ones. Of course, price isn’t the only reason, and there’s little Intel can do about the other problems associated with electric vehicles—like how they perform in the winter—but Intel should be able to realize sales just by making electric vehicles cheaper.
It can’t stop there, either; it needs to win back its core market, the gamers. Improvements in graphics cards could certainly help matters, but so too will fixing the processor issues we already see. For every gamer that goes to AMD or the like and finds no problems, that’s a loss for Intel, possibly forever. Intel must address its quality issues before it can expect to sell other companies on the notion of being their key chipmaker.
Is Intel a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on four Buys, 26 Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After an 11.27% loss in its share price over the past year, the average INTC price target of $40.31 per share implies 31.6% upside potential.
