The biggest maker of computer processors in the world, Intel, is one of only six companies in the tech-heavy benchmark whose shares have gone down since June 16. The index, on the other hand, is up 21%. This is because traders are buying up beaten-down tech stocks because their prices are lower and they think inflation is going down.
The slow performance is the latest sign that investors are still hesitant to back Chief Executive Officer Pat Gelsinger’s 18-month-long plan to improve Intel Corporation (NASDAQ: INTC)‘s ability to make chips. Even though a lower forecast for profits and sales in late July didn’t help, weak forecasts from competitors like NVIDIA Corporation (NASDAQ: NVDA) and QUALCOMM, Inc. (NASDAQ: QCOM) haven’t stopped their stocks from going up. Since the middle of June, shares of both companies have gone up by more than 17%.
Kim Forrest, founder and chief investment officer at Bokeh Capital Partners, said that investors have decided that Intel Corporation (NASDAQ: INTC) is too hard to turn around.
After dominating the semiconductor industry for decades, Intel Corporation (NASDAQ: INTC) lost its lead in semiconductor process technology, letting companies like Taiwan Semiconductor Mfg. Co. Ltd. (TPE: 2330) pass it. Gelsinger has promised to get the company back to the top in advanced production. He plans to do this by spending tens of billions of dollars to build new factories in the U.S. and Europe and update the ones that are already there.
The poor performance of the company’s stock, on the other hand, shows that investors know that even if Gelsinger is successful, it will take a long time to turn things around. Since Intel Corporation (NASDAQ:INTC) is losing market share by making products with old manufacturing technology, future earnings reports may also be disappointing. It will be hard for it to grow until these problems are fixed.
Wall Street analysts have cut Intel Corporation (NASDAQ:INTC)‘s profit forecasts after the disappointing earnings report for the second quarter. According to data put together by Bloomberg, estimates for earnings per share in 2023 have dropped by 28% over the past month. This is compared to a drop of about 13% for companies in the S&P 500 that are related to semiconductors. This is because demand for many types of chips is falling because inventories are growing and the economy is growing more slowly.
Due to the lower expected profits, Intel Corporation (NASDAQ: INTC) is now more expensive compared to what it is expected to earn. Intel Corporation (NASDAQ:INTC)‘s price is close to the highest it’s been in the last 10 years, at almost 15 times profits for the next 12 months.
Siddharth Singhai, founder and chief investment officer at Ironhold Capital Management, isn’t investing in Intel Corporation (NASDAQ:INTC) right now because the company is worth a lot and the turnaround isn’t clear how long it will take.
He added that they are in such a great place if they can just catch up on that technology.
Featured Image: Megapixl @Dragan56
