Cheap or Chump? The Outlook Is Dim for Intel Stock.

Stocks to sell

Intel’s (NASDAQ:INTC) management is confident, but should investors be confident about Intel? CEO Pat Gelsinger sees “steady progress” but your financial decisions should be based on facts, not rhetoric. After mulling over the relevant facts and circumstances, we’re assigning Intel stock a “D” grade and we’re not eager to recommend it now.

Even after a share-price slump in 2024 so far, Intel still isn’t especially cheap. Consider that Intel’s trailing 12-month price-to-earnings ratio is 32.29x, while the sector median P/E ratio is 30.55x.

Yet, our cautionary note isn’t just about P/E ratios and other traditional metrics. It’s also about Intel’s issues and challenges. Considering the potential struggles ahead, it would be unwise to think of Intel stock as a cheap investment.

Intel and Tariff Troubles

Whether Joe Biden or Donald Trump wins this year’s presidential election, it will be a tough road ahead for Intel. Trump expressed his intention to impose tariffs of up to 60% on a broad range of Chinese goods imported into the U.S.

As for Biden, he already unveiled sweeping new tariffs on Chinese products brought into the U.S. for sale. According to The Wall Street Journal, the “tariff rate for Chinese semiconductors would double by 2025 — to 50% from 25%.”

Biden acknowledged that China will undoubtedly retaliate against these tariffs. Hence, it’s practically inevitable that the Sino-U. S. tech trade war will persist into 2025 and beyond.

That’s not good news for Intel, which certainly wouldn’t benefit from tariffs on U.S.-made chips exported to China. Perhaps sensing that there’s trouble brewing, the market sold off Intel stock in April and kept it down near $30 in May, even while many other tech stocks rallied.

Huge Ambition, or a Doomed Mission?

Meanwhile, Gelsinger and Intel may be “getting ahead of their skis,” as the old saying goes. It’s fine for a company to be ultra-ambitious, but only if that company is in a very strong financial position.

It seems that Gelsinger wants to completely revamp Intel into a foundry business. In other words, Intel would build microchips from scratch and contractually sell them to other companies.

As The Wall Street Journal reported, Intel seeks to “become the world’s second-largest contract chipmaker by 2030.” That’s an awfully optimistic goal during a time of intense trade tensions between the U.S. and China.

Besides, Intel isn’t in an ideal financial position to attempt a massive revamp of its business model now. On a GAAP-measured basis, Intel lost 9 cents per share in 2024’s first quarter and expects to lose 5 cents per share in the current quarter.

Furthermore, Intel’s position of cash and cash equivalents contracted from $8.232 billion as of April 1, 2023, to $6.923 billion as of March 30, 2024.

Intel Stock: Don’t Believe the ‘Steady Progress’ Rhetoric

The point here is that Intel is a money-losing operation on a GAAP basis with a dwindling capital position. Yet, Intel will surely have to spend massive amounts of capital on its business-model revamp.

Moreover, Intel is harboring this grand scheme during a time of escalating China-U. S. trade tensions. Frankly, Gelsinger’s chatter about Intel’s “steady progress” doesn’t hold up very well under scrutiny. So, after a careful review of the relevant facts, we’re giving a “D” grade to Intel stock.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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