Intel (NASDAQ:INTC) stock has been making some big moves lately, and not in a good way.
That is, following the chip maker’s latest quarterly earnings release, INTC stock has experienced a double-digit post-earnings price decline.
The factors driving this sell-off have some losing confidence in the chip maker’s turnaround catalyst. To these more fair-feather fans of the stock, shares are at risk of becoming a “value trap” once again.
Yet it makes sense that last week’s quarterly earnings release/guidance update elicited a negative reaction from the market (more below), there’s no need to jump to a bearish conclusion.
Even as this sell-off may continue in the near-term, there’s no reason to bail on Intel today.
As I’ll explain below, there is a path for this stock’s comeback to continue, perhaps creating a great opportunity for patient investors willing to hold on during this latest round of turbulence.
INTC Stock: Weak Guidance Outweighs an Earnings Beat
On Jan. 25, Intel released earnings results for the quarter ending Dec. 31, 2023. For the quarter, both revenue ($15.4 billion) and earnings (54 cents per share) represented an earnings beat, as prior to the release, consensus called for $15.3 billion in revenue, and earnings of 46 cents per share.
However, it was updates to guidance, not the results themselves, that received the greatest focus. Hence, that is why INTC stock declined by nearly 12% on the first trading day following the earnings release. For Q1 2024, the company guided for between $12. billion and $13.2 billion in revenue.
Unlike some other situations where stocks have tanked post-earnings due to guidance falling slightly below sell-side forecasts, Intel’s updates to outlook really missed the mark. Prior to the release, Wall Street was forecasting $14.2 billion in revenue for this quarter.
Again, while this weak guidance is not the best look for Intel, it is short-sighted to believe that this development completely negates the bull case for shares. At least, given that there are two comforting prospects that suggest a trip back to higher prices remains well within the realm of possibility. Here’s what I mean.
Two Key Catalysts are Still in Play
Based on the aforementioned outlook, it’s clear that this chip maker’s turnaround continues to be a work-in-progress. However, it’s not as if INTC stock has turned into a turnaround play with slim-to-none odds of success. Namely, because two catalysts are still well in play.
First, the company’s foundry-related catalysts. Intel is betting billions on becoming a major chip foundry, or manufacturer of semiconductors for third party chip designers that outsource production.
While a bit of a gamble, remember that Intel is one of the semiconductor companies set to receive subsidies being awarded by the U.S. Federal Government, in its effort to “re-shore” chip production stateside.
While not certain, these subsidies may help to increase the chances of the foundry gambit paying off for the company.
The second catalyst for Intel that has yet to disappear is its AI chips catalyst. As you may recall, the company is set to debut a new generative AI-compatible chip (the Gaudi3) this year.
Despite recent belittling of Intel’s AI potential, as demand for AI-compatible chips for use in devices like PC begins to really take off, current perceptions about Intel “falling behind in AI” could quickly dissipate.
There’s No Reason to Stay Away Just Yet
Along with the foundry and AI catalysts, remember too that there are other factors that suggest higher revenue, higher earnings, and a higher stock price for INTC lie ahead.
As discussed previously, these include the company’s projected $3 billion in annual cost savings resulting from its restructuring, plus the prospect of the “tech slowdown” (which has hurt demand from non-AI end users) finally ending.
While Intel could languish in the low-$40s per share (or worse, slide even lower) in the short run, over a multiyear time frame shares could re-hit price levels and (after a decade of subpar performance), make some new multi-year highs.
With this, feel free to hold onto an INTC stock, and consider taking advantage of any subsequent weakness to enter/add to a position.
INTC stock earns a B rating in Portfolio Grader.
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.