Where will Intel stocks be in 1 year?

With shares down 60% in 2024, Intel (INTC -0.30%) underlines the importance of diversifying stock market holdings. The technology giant now trading at unprecedented levels since 2012 — deletion over a decade of investor returns this year. But is the sale overdone? Let’s discuss what the next 12 months could bring.

What went wrong for Intel?

Founded in 1968 and rising to prominence during the PC boom of the 1990s and 2000s, Intel was the quintessential American chipmaker. The company specializes in consumer and enterprise central processing units (CPU), which can be considered the brain behind a computer. Like many US tech companies, it has also started investing more in AI-related hardware after the launch of ChatGPT in late 2022.

Intel seemed to have all the hallmarks of a blue-chip stock. His business was greatestablished and usually profitable. However, disastrous second-quarter earnings turned that narrative on its head.

Revenue was down about 1% year after year to $12.83 billion, which isn’t the end of the world. However, management expects revenue to fall 8% in the third quarter. The bottom line was even bleaker, with net income falling from $1.47 billion to a loss of $1.65 billion, caused by weakness in Intel’s foundry business, which makes chips.

Surprisingly, some low performance also came from Intel’s pivot to AI. While the core client computing segment (which sells chips for consumer PCs) grew 9% to $7.41 billion, the company’s data center and AI segment fell 3% , up to $3.05 billion amid growing competition from rivals such as Advanced microdevices and Qualcomm. Unlike Nvidiawhich strengthens them economic moat with software solutions like Cuda, Intel seems poorly differentiated in the AI ​​hardware market.

What could next year bring?

Intel fails where others succeed. And investors should question whether management is to blame. The company has been rapidly changing directors, which could affect its long-term planning. CEO Patrick Gelsinger replaced Bob Swan in 2021, who replaced Brian Krzanich in 2019. After these disastrous results, Gelsinger may not last long. But if he leaves, he won’t be the only one.

As part of its recovery strategy, Intel plans to lay off workers 15,000 workers and cut non-essential work to save $10 billion in costs by 2025.

Image source: Getty Images.

Cutting costs looks like the right move. If Intel can achieve these goals, it could find itself in a much better financial position over the next 12 months — just in time to execute on growth opportunities with new PC AI chips like Lunar Lake, designed to increase lifespan battery life and performance to rival them. rival Arm– chips based on Apple and Qualcomm.

Intel’s sawmill business will take longer to fix as the company has fallen behind Asian rivals such as Taiwan Semiconductor Manufacturing in semiconductor manufacturing. That said, Intel is a natural beneficiary of the US government’s efforts to nearshore chipmaking technology, winning massive subsidies such as nearly $20 billion in CHIPS and Science Act funding this year. This support will benefit investors by helping Intel save on capital expenditures for decades to come.

Is Intel stock a buy?

Intel he seems able to quickly stabilize his losses and make a comeback to growth through cost reduction and new opportunities such as PC AI chips. And in the longer term, its struggling foundry business could return to prominence with the help of significant government support.

Having said that, with a the forward price-earnings ratio (P/E) multiple of 85, Intel stock looks way overpriced be considered a buy. The stock is likely to continue to underperform over the next 12 months, and investors may want to wait before considering a position in the stock.