Does Intel Stock Have Room to Grow?

Intel Corporation (NASDAQ:INTC)’s recent innovations, Xeon 6 SoC and Xeon® 6 processors with Performance, are all set to shake up the telecommunication segment and modernize infrastructure if management is to be believed but should they?

Intel’s share price lost momentum in January 2025 after posting Q4 results, and after a brief blip, the share price is now down 32%.

So, amid this share price volatility and underwhelming track record over the past decade, is there still room for this old industry goliath to once again challenge the up-and-comers that have left it in the dust, like NVIDIA?

Does Intel Have Any Revolutionary Innovations Under Its Belt?

After topping the charts for years with advanced technologies, cutting-edge products, and innovations, Intel seems to be lagging behind industry peers. A tectonic shift happened when customers started to favor GPUs from NVIDIA over CPUs from Intel – and word on the Street is QPUs, or quantum processing units will one day be in vogue thanks to companies like IONQ.

In January, Intel canceled the release of a new AI chip called Falcon Shores, a launch that not only disappointed customers but also put Intel in the rearview mirror against competitors’ equivalent chips.

It seems that Intel is lacking a major innovation to enter the cloud-based AI data center market as a serious competitor. Adding insult to the innovation void injury is the departure of CEO Pat Gelsinger.

The ongoing corporate restructuring plans have also not made full sense till now. For instance, the separation of Intel Capital, Intel’s global venture capital arm, into a standalone fund doesn’t appear to be benefiting the company in any meaningful way right now.

Currently, the technology industry is keenly eyeing new AI-integrated systems and solutions, so much so that the global AI chip market is forecast to mushroom to $311.58 billion by 2029, growing at a CAGR of 20.4%, driven by hyperscalers and increasing use of Generative AI technologies and applications, including GenAI and AIoT, across segments like BFSI, healthcare, retail & e-commerce, and media & entertainment. So, it remains a concern whether Intel can capitalize on this?

What Lies Ahead Could Push Back Intel

Intel’s litany of problems are not limited to its own innovation shortfalls or competitive failures outside its control. Recently, U.S. President Donald Trump notified his intention to scrap the Biden administration’s Chips Act.

The Act was introduced to promote the U.S. chips market with its subsidies aimed at bringing more chip-making to the U.S. Intel is one of the significant beneficiaries and is expected to be severely impacted if this order is executed.

On the surface, the consensus perception is that Intel has derailed strongly from its prior track that led to so many successes when it dominated the semiconductor design and manufacturing industry. Further government funding looks unlikely at a time when the company is already struggling to protect whatever moat remains.

Sales Looking Up, But Profits a Concern

During the fourth quarter of 2024, management reported revenues of $14.30 billion, crushing the Street’s expectations of $13.82 billion while gross margin didn’t disappoint either, coming in at $5.58 billion.

The company reported a full-year revenues of $53.10 billion, of which total Intel Products revenue marked a decent 3% growth from the prior year to a total of $48.90 billion.

A deeper dive into the report surfaces troubles, though. For the fourth quarter, the company reported a net loss of $153 million or $0.03 per share, compared to a net income of $2.66 billion or $0.63 per share in the year-ago period.

Non-GAAP net income stood at $568 million for the period while non-GAAP EPS of $0.13 moved in a positive direction, slightly above analysts’ expectations.

For Q1 2025, the management team forecasts sales in the range between $11.7 billion and $12.7 billion, a traditional quarter-over-quarter seasonal dip.

Does Intel Stock Have Room to Grow?

Intel stock does have meaningful room to grow of 15.4% according to analysts consensus view that fair value sits at $22.72 per share. That price target is largely shared by the 34 analysts covering the stock, but the range does span from $18 to $31 per share.

It’s likely always going to attract income investors given that it’s paid a dividend for 33 years straight and is still largely viewed as a bellwether in the industry thanks to its former status as the dominant player. But failed launches, deteriorating cash flow, and operational mis-steps at a time when NVIDIA is jumping leaps and bounds ahead of rivals bodes ominously for the former giant.

The company’s forward price-to-sales ratio of 1.68x suggests undervaluation and the forward Price/Book multiple of 42.52x is 77.8% lower than the industry average. As a result, an argument can be made that Intel should sit squarely in the middle of an undervalued radar.

It’s a brave investor who will bet the farm on it, though, after a slowdown in progress and delayed execution, both of which are hurting financials and the share price.

If you were to grade Intel, it would get an F when it came to growth, Cs or Ds on cash flows and profits, but shines most on relative value, where a B is probably a fair grade.

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