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Is Intel Stock A Buy Before Chipmaker’s Third-Quarter Earnings Report?

Chipmaking giant Intel (INTC) has had a rough go lately. Intel stock has fallen hard after its last five quarterly earnings reports. However, with new leadership at the helm, some investors may be wondering: Is INTC stock a buy right now?




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The Santa Clara, Calif.-based company ruled the personal computer era thanks to its close partnership with Windows software maker Microsoft (MSFT) in what was called the Wintel alliance. But the growth of smartphones and other computing devices diminished its influence.

Intel was the world’s No. 1 semiconductor vendor by revenue in 2020, research firm Gartner said.

Intel had 15.6% market share last year, compared with 12.5% for No. 2 vendor Samsung. Intel’s chip revenue rose 3.7% year over year to $70.2 billion as the market for central processing units for PCs and servers was robust.

Intel Stock Fundamental Analysis

On July 22, Intel easily beat Wall Street’s second-quarter targets but forecast declining profit margins amid rising production costs. INTC stock tumbled 5.3% on the news.

Intel earned an adjusted $1.28 a share on sales of $19.63 billion in the June quarter. Analysts expected earnings of $1.07 a share on sales of $17.81 billion, according to FactSet. On a year-over-year basis, Intel earnings rose 4% while sales dipped a fraction.

Intel’s sales now have fallen for four straight quarters year over year. But its earnings returned to growth after three consecutive flat or down quarters.

For the current quarter, Intel expects to earn an adjusted $1.10 a share on sales of $19.1 billion. In the third quarter last year, Intel earned $1.11 a share on sales of $18.3 billion.

For the full year, Intel forecast adjusted earnings of $4.80 a share on sales of $77.6 billion. Analysts had been looking for earnings of $4.64 a share on sales of $72.7 billion.

Intel stock has dropped after its last five quarterly earnings reports.

The next potential catalyst for Intel stock is likely its third-quarter earnings report, due on Oct. 21.

INTC Stock Tanks On Chip Delays

Investors sold off Intel stock last summer after the company disclosed the delay in production of 7-nanometer scale processors. Its shares declined 21% in the week after the news.

The delay puts Intel further behind chip foundry Taiwan Semiconductor Manufacturing (TSM), which is already mass producing chips at 5-nanometer scale. Intel’s current state-of-the-art chips are at 10-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter. Smaller circuits translate to faster, more power-efficient processors.

Intel rival Advanced Micro Devices (AMD) has been leveraging Taiwan Semiconductor’s advanced process nodes to take market share in processors for PCs and servers.

On March 23, Intel said the company is making good progress with development of its 7-nanometer chips. It also announced plans to spend $20 billion to build two new semiconductor fabs in Arizona. Plus, it outlined an plan to become a major provider of foundry capacity in the U.S. and Europe to serve customers globally.

However, on June 29, Intel revealed a delay in production of its next-generation Xeon data center processors by about one quarter to the first quarter of 2022. Intel shares fell 1.3% on the news.

The delay was related to software optimization not hardware, Mizuho Securities analyst Vijay Rakesh said in a July 11 report.

Apple, Microsoft Moves Rattle Intel Stock

In June 2020, Intel suffered a blow to its reputation when customer Apple (AAPL) revealed that it is moving to its own chips for Mac computers. The switch from Intel chips to Apple silicon will take about two years to complete. Taiwan Semiconductor will make the chips from Apple’s designs.

Investment bank Morgan Stanley estimated that Intel was getting 5.8% of its total revenue from supplying microprocessors to Apple.

In November 2020, Apple unveiled its first Mac computers using homegrown processors. Apple claims its M1 chip delivers up to 3.5-times faster central processing unit performance than Intel-based Macs. It said its M1 chip also has much faster graphics performance and better power efficiency.

Intel stock suffered another blow in December 2020 when Bloomberg reported that Microsoft is designing its own chips for data-center servers as well as its Surface PCs. INTC stock fell 6.3% on the day the news broke.

Intel Brings In New Chief Executive

On Jan. 13, Intel announced that it was replacing fiscally minded Chief Executive Bob Swan with a technology-focused leader in then-VMware (VMW) CEO Pat Gelsinger. Gelsinger, who previously served as Intel’s chief technology officer, took over on Feb. 15. Swan had been Intel’s chief financial officer before he assumed the top position 2-1/2 years earlier.

On a conference call with analysts to discuss fourth-quarter results, Gelsinger vowed to stay the course and focus on improving Intel’s chip-manufacturing operations.

He expressed confidence that Intel is making progress in resolving issues with its 7-nanometer process technology. He doubled down on the company’s commitment to in-house manufacturing but said Intel will use outside fabs for some chip production.

“Clearly, we’re not interested in just closing gaps. We’re interested in resuming that position of the unquestioned leader in process technology,” Gelsinger said.

On May 3, Intel announced plans to invest $3.5 billion to expand its manufacturing operations in New Mexico. The investment is focused on advanced semiconductor packaging technologies.

INTC Stock Technical Analysis

Intel stock hit a 19-year high of 69.29 in January 2020 ahead of the coronavirus stock market correction. INTC stock notched its all-time high of 75.81 way back in August 2000 around the time of the dot-com boom and bust.

On March 16, Intel stock touched a buy point of 65.21 out of a loose, year-long double-bottom base, according to IBD MarketSmith daily charts. But INTC stock has a poor track record of late for sustaining gains after stock breakouts.

Intel stock climbed as high as 68.49 on April 12 before declining ahead of the company’s first-quarter earnings report. It ended the regular session Oct. 1 at 53.86.

Intel stock has a subpar IBD Relative Strength Rating of 26. The best growth stocks typically have RS Ratings of at least 80. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.

It has a worst-possible IBD Accumulation/Distribution Rating of E, meaning heavy selling of shares by institutional investors.

Is Intel Stock A Buy Right Now?

Intel stock is not a buy right now. However, it has been consolidating for the past six months with a buy point of 68.59. But it’s near the bottom of its pattern. So, it likely will face overhead resistance before approaching its next formal buy point.

In addition, INTC stock is trading near its 50-day moving average line, where it has faced resistance. It’s also beneath its 200-day moving average line.

INTC stock lacks the qualities that make a CAN SLIM stock, under IBD trading principles. Those qualities include consistent profit growth and market leadership.

INTC stock ranks No. 22 out of 39 stocks in IBD’s Electronics-Semiconductor Manufacturing industry group, according to the IBD Stock Checkup. That means there are much better stocks to investigate in the group.

But the chip manufacturing group ranks No. 103 out of 197 industry groups that IBD tracks. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.

Intel stock has a below-average IBD Composite Rating of 38 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

To find the best stocks to buy or watch, check out IBD Stock Lists as well as IBD’s Leaderboard, MarketSmith and SwingTrader platforms.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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