Intel (NASDAQ: INTC) put on a show during the pandemic as they rode the technological wave. However, it seems the rapid growth might be slowing as analysts remain pessimistic for the short-term Intel stock forecast. The bulls are focusing on the bigger picture as financials look to rebound in 2024 and beyond. This article will look to breakdown the bullish and bearish argument on the Intel stock forecast.
Table of contents
- Bullish argument
- Bearish argument
The bullish argument on Intel
Analysts and price forecasts
Price forecasts remain modesty bullish. Intel is currently trading at $48.20. First, Wallet Investors forecasts Intel’s share price will climb to $52.879 in a year and $72.724 in five years. If true would post a 9.7%, and 51% return respectively. Second, according to CCN business, the next 12 month forecasts from 34 analysts include a high of $100, a median of $50, and a low of $40. The median represents a modest 3.7% gain. Lastly, the current consensus price target is $57.89, which is still higher than the current price.
The surge in demand for computers and other computing goods during the pandemic saw Intel’s financials jump to new heights. For example, revenue and earnings for Q2 2020 climbed to all-time highs of $78.955 and $23.661 billion, respectively. Consequently, Intel’s P/E ratio and EPS growth was suggesting the bulls owned the chart for 2020 and 2021. For example, INTC’s EPS grew by 15% between January and June this year. While the rapid expansion in earnings and revenue may undergo a correction heading into 2021, analysts are optimistic for the long-term future. Analysts expect EPS, revenue, and earnings to return to all-time highs in 2024, and to continue rise.
Moreover, another attractive part of Intel’s financials is its growing Return on Equity (ROE). Intel’s current ROE is 29.4%. The general rule of thumb is that ROE above 20% is solid, which Intel satisfies. Not to mention, Intel is far above the industry average of 11%. It is worth noting that Intel maintains a high ROE while debt is declining. Essentially, Intel is not using debt to artificially inflate ROE, which is positive for fundamental investors. Moreover, analysts are projecting Intel’s ROE to dip but still remain high at 22.2% in three years.
Analysts and price forecasts
Despite, modestly bullish price forecasts analysts hold a pessimistic view for three reasons. First, the low price target of $40 would provide a downside of 17%, which outweighs the median of $50 that would only provide a 3.7% gain. Second, the consensus price targets among analysts are on a decline. For example, the price targets for 180,90,30, and 0 days ago is $64.69, $61.49, $61.49, and $57.89. Thus, the current price forecast is susceptible to further drops in the near future. To add insult to injury, the past three analysts changes rated Intel a sell and put a price target below the current price. For example, Goldman Sachs position on the 10th of October was to sell with a price target of $46.
Despite strong historical earnings, revenue, and ROE growth Intel hold some areas of financial concern.
Intel’s disappointing Q3 financials are raising some red flags for 2021. The major area of concern for investors was that statutory EPS came in below expectations at $1.02, missing estimates by 2.4%. However, it seems negative EPS growth is not a one-off event for Intel but a trend for 2021. Especially as the analysts covering Intel are forecasting a 23% drop in statutory EPS during 2021. Ultimately, suggesting Intel will face revenue and earnings challenges come 2021, which confirms the short-term decline in earnings (opinion not advice).
Moreover, Intel’s high debt level and rising D/E ratio are concerning. Intel’s debt sits at $36 billion. Investors should be asking can Intel service its debt with cash? The answer is no. Intel holds $25.8 billion in cash ($18.3 billion from cash and short term investments and $7.5 billion from receivables). Ultimately creating a gap of $10.2 billion. To add insult to injury, Intel’s D/E ratio rose from 46.8% to 49% between Q2 and Q3. However, Intel shaved off $3 billion in debt between March to September this year. If Intel can continue to trim its debt into 2021 and beyond, then the debt contention would go from a bearish to a bullish argument. (opinion not advice)
Before I begin, I remind our viewers that this is not financial advice. Instead, the information above is an investment commentary from extensive research.
Overall, you have a company that is cooling off from its unprecedented growth in earnings and revenue. The decline makes sense as the demand-supply imbalance will take some time to correct itself. Hence, the bears look to dominate the short-term chart (opinion, not advice). However, the growth in computers and computing good sales should only continue to rise in the future. Therefore, bullish analysts are forecasting stock price growth for Intel from 2024 and beyond.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Senior Manager, Patrick McLoughlin