Posted on November 7th, 2022
Intel Corp. (INTC) underperformed the S&P 500, falling roughly 45% compared to the S&P 500’s loss of about 20% over the past year. Amidst challenging economic conditions, hedge funds were actively selling Intel’s shares.
Intel is a multinational technology company that designs, develops, and manufactures semiconductor computer products and technologies. The company operates through various segments, including the Client Computing Group, Data Center Group, Internet of Things Group, Non-volatile Memory Solutions Group, and Programmable Solutions Group.
Over the past five decades, Intel has evolved into a more data-centric company. While personal computer (PC) related products are still a significant part of its revenue stream, Intel continues to adapt, invest in research and development, and utilize strategic partnerships to enhance technologies and meet consumer demands. Intel has a lot of competition in the chipmaker market and is presently investing in its semiconductor manufacturing operations to improve the fabrication process. Much of the challenges Intel faced over the past year were experienced by the semiconductor industry overall, which has been impacted by high inflation, rising interest rates, and supply-chain delays.
Mixed Actions from Hedge Funds and Institutions
Hedge funds were selling in the second quarter, with the aggregate 13F shares held by hedge funds lowered to about 337.8 million from 349.8 million, a change of approximately 3.4%. Of the hedge funds, 31 created new positions, 163 added to an existing position, 56 exited, and 148 reduced their position. In contrast to hedge funds, institutions increased their aggregate holdings by about 0.5% to approximately 2.50 billion from 2.49 million. The 13F metrics between 2005 and 2022 show that while funds have been on a steady upward trend, Intel’s stock price has taken a downturn over the past two years.
Analysts are cutting their earnings estimates for Intel. Earnings are expected to decline in the coming year, decreasing to $1.26 by December 2023, down from an expected $2.05 for December 2022. Performance is expected to bring revenue to roughly $62.0 billion by late 2023, down from 63.6 billion in 2022.
Price Targets Are Adjusted
Analysts appear to share a lukewarm view of the company based on ratings and declining price targets. Christopher Danely of Citi maintained a Neutral rating on Intel and lowered the firm’s price target on the company to $27 from $30. Baird & Co. analyst Tristan Gerra was encouraged by Intel’s earnings report and kept a Neutral rating on shares. Gerra lowered the firm’s price target on Intel to $34 from $40. Gus Richard of Northland Capital Markets held a $52 price target on Intel, and an Outperform rating. Richard expects to see improved performance by the second half of 2023.
Queue the Patient Investor
Analysts’ estimates for Intel include a decline in earnings and revenue through 2023. However, while forecasts for the year ahead may not be encouraging, investors should keep an eye on the stock and wait as its business turns around. Intel is still one of the largest chipmakers in the semiconductor industry and has been making strategic business decisions to improve its infrastructure and reduce costs. The stock has a better long-term outlook for patient investors.