Fade the Rally in Intel Stock: Chip Analyst

Intel Corporation (INTC) has been on a rollercoaster ride in recent months, with its stock price surging and then plummeting. The chipmaker's stock has witnessed a sharp sell-off in 2024 thanks to its tepid outlook. However, Intel is projected to deliver healthy earnings growth over the next five years, which could lead to a solid stock price rally. But can the stock regain its mojo and deliver healthy gains over the next five years? Let's dive into the factors that could impact Intel's stock performance and explore the potential risks and rewards of fading the rally in Intel stock.



Intel's Recent Performance and Outlook

Intel's stock has remained flat in the past year, underperforming the PHLX Semiconductor Sector index, which has risen a healthy 59% in the same period. The chipmaker's fourth-quarter 2023 results failed to satisfy Wall Street's expectations, leading to a 12% decline in the stock price in a single day. Similarly, Intel's first-quarter 2024 results also fell short of analysts' expectations, causing the stock to fall another 12%. The company's failure to live up to expectations has been a significant factor in its underperformance.

However, Intel is showing signs of improvement. In its first-quarter 2024 results, the company reported a 9% year-over-year increase in revenue to $12.7 billion. More importantly, Intel reported an adjusted profit of $0.18 per share from a loss of $0.04 per share in the same quarter last year. The company enjoyed a healthy year-over-year increase of 8.2 percentage points in the gross margin thanks to a solid turnaround in its personal computer (PC) business. Intel's top line matched analysts' estimates, while its earnings were higher than the consensus forecast of $0.13 per share. However, the outlook wasn't up to the mark. Intel is expecting Q2 revenue of $13 billion at the midpoint of its guidance range, along with adjusted earnings of $0.10 per share. Wall Street was looking for $13.6 billion in revenue from the company, which could indicate that Intel's growth prospects may not be as strong as previously thought.



Potential Risks and Rewards of Fading the Rally in Intel Stock

Fading the rally in Intel stock carries both potential risks and rewards. Here are some key points to consider:

Potential Rewards:

1. Short-term profit: If the stock price corrects or pulls back after the recent rally, the investor could book profits by selling their shares.
2. Risk management: Fading the rally can help manage risk by locking in gains from the recent rally and avoiding potential losses if the stock price reverses.
3. Potential for a larger move: If the analyst's bearish outlook is correct, and the stock price continues to decline, the investor could profit from a more significant move.

Potential Risks:

1. Market momentum: If the rally in Intel stock continues, the investor may miss out on further gains by fading the rally. The stock has already experienced a significant rally, and there is a chance that it could continue.
2. Incorrect analysis: If the analyst's bearish outlook is incorrect, and the stock price continues to rise, the investor could suffer losses by fading the rally.
3. Timing: Fading the rally requires precise timing to enter and exit the trade. If the investor enters too early or exits too late, they may miss out on potential gains or suffer losses.
4. Transaction costs: Frequent trading to fade the rally can result in higher transaction costs, which can eat into profits.

Conclusion

Intel's recent performance and outlook suggest that the chipmaker may not be out of the woods yet. While the company has shown signs of improvement, its failure to meet Wall Street's expectations has been a significant factor in its underperformance. Fading the rally in Intel stock carries potential rewards, such as short-term profit and risk management, but also potential risks, such as missing out on further gains, incorrect analysis, poor timing, and higher transaction costs. It is essential to weigh these factors carefully and consider the investor's risk tolerance and investment goals before making a decision.