Earnings per share estimates indicate an increase of 118% over the next two years.
shares of intel (INTC -1.89%) It has fallen about 22% since January 25, when the company announced its fourth-quarter 2023 earnings. The company posted 10% year-over-year revenue growth, beating Wall Street expectations by $230 million. During this quarter, Intel enjoyed significant gains due to the recovery of its PC market. But that wasn't enough to mask the weak guidance that caused the stock to plummet.
Intel now expects first-quarter 2024 earnings to reach $0.13 per share, compared to analysts' expectations of $0.42 per share. Meanwhile, the company expects revenue to be between $12 billion and $13 billion, lower than the $14 billion that Wall Street had expected.
But with weak guidance, it's important to keep a long-term view when it comes to tech stocks, especially when it comes to stocks expanding in the artificial intelligence (AI) space. Intel has had a rough few years, but it is restructuring its business to prioritize profits while also investing in high-growth areas such as AI.
As a major semiconductor maker, the company has huge potential in the AI ​​field over the long term, and its stock price could skyrocket. Here he introduces one AI stock that could make you a millionaire.
Intel is overhauling its business to prioritize profitability
Inter has had a difficult few years, to say the least. The company has been a major chip supplier for at least 10 years, accounting for more than 80% of the central processing unit (CPU) market. apple's long-standing MacBook lineup. But Intel has rested on its advantage, leaving it vulnerable to more innovative competitors.
chip rival Advanced Micro Devices began eroding Intel's CPU market share in 2017, and Intel's share is now down to 69%. Then, in 2020, Apple severed ties with Intel in favor of more powerful in-house hardware designs.
But that downfall appears to have reignited Intel's fortunes, and the company is poised to get back on track in the coming years. Last June, Intel announced a “fundamental shift” in its business strategy, adopting an in-house foundry model that is expected to save the company $10 billion by 2025.
With this move, Intel will transform its business from primarily being a general device manufacturer to the following businesses. taiwan semiconductor manufacturing, has become the leading provider of foundry capacity in North America and Europe. Intel says foundry-style relationships with its manufacturing groups can improve efficiency and profitability, with the potential to achieve non-GAAP gross margins of 60% and operating margins of 40%. .
Earnings per share estimates indicate an increase of 118% over the next two years
In addition to changing business models, Intel is investing heavily in the AI ​​market, which is predicted to reach nearly 2 trillion by 2030. The company announced a range of AI chips in December last year.Some of them compete with similar products by market leaders. Nvidia.
Additionally, Intel showed off new Core Ultra processors and Xeon server chips, which include neural processing units to run AI programs more efficiently.
Last year, demand for GPUs surged, and chip stocks soared along with the AI ​​boom. Nvidia has been in the spotlight, with its stock up 239% in 2023, and AMD's stock up 127%. Intel's stock price has also grown significantly, rising 90% last year. But the more modest rise means Intel's stock is trading at a better price than its two biggest chip rivals.
For reference, Intel's forward price/earnings (P/E) ratio is 28, making it a better value than AMD's 47 and Nvidia's 35. Forward P/E is a useful valuation metric that is calculated by dividing a stock's current price by its stock price. Estimated earnings per share (EPS). The lower the number, the better the value. And in Intel's case, the company's stock is trading at a discount compared to its competitors.
Additionally, this chart shows that Intel's earnings could reach nearly $3 per share over the next two fiscal years. Multiplying this number by the company's forward P/E yields a stock price of $85.
Looking at its current position, Intel's stock price could rise 118% by FY2026, according to these projections. With its growing presence in the AI ​​space, Intel is a great buy right now, and with the right investment could make you a billionaire.
Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: These are a long call on Intel at $57.50 in January 2023, a long call on Intel at $45 in January 2025, and a short call on Intel at $47 in May 2024. The Motley Fool has a disclosure policy.