A couple of years ago, trend followers and bandwagon jumpers mocked Intel (NASDAQ:INTC). It’s funny to see the sentiment shift in 2024 as some commentators desperately want Intel stock to be the comeback kid. While a spectacular Intel stock rally isn’t impossible, investors shouldn’t hold their breath and assume that a “moonshot” is imminent.
Today is a great day to dispel some misconceptions. Intel shares aren’t necessarily “cheap,” since Intel’s GAAP and non-GAAP trailing 12-month price-to-earnings ratios are actually above their respective sector medians. So, before you bet the farm on a “laggard-to-leader” Intel comeback, get the full story and you’ll probably reconsider.
The ‘Underappreciated Opportunity’ That’s Fully Appreciated
Lately, we’ve heard chatter about an Intel stock “catch-up” trade for 2024’s second half. One commentator even called this an “underappreciated opportunity” based on the prediction of a “ramp over the next few quarters” in purchases of artificial intelligence enabled personal computers.
That’s relevant because, unlike some other chipmakers, Intel derives significant revenue from PC chips.
Here’s a word to the wise. When you’re hearing about a “catch-up” trade in popular financial media, it’s likely already caught up. And when you’re hearing about an “underappreciated opportunity,” chances are, it’s already fully appreciated by the ultraefficient financial markets.
The Intel stock perma-bulls are engaging in mental gymnastics. They desperately hope that everybody and his uncle will start buying AI PCs throughout the rest of 2024.
Yet, there’s no compelling reason to assume that this will actually happen. According to industry research firm IDC (via Bloomberg), “[O]nly 3% of PCs shipped this year will meet Microsoft’s processing power threshold to be considered an AI PC.”
This is a reality check for the ultra-optimists if they thought that AI PCs are selling like hot cakes.
Don’t Count On a Huge Intel Stock Short Squeeze
Thanks to InvestorPlace contributor Eddie Pan, we caught wind of an interesting theory from Mizuho analysts. They proposed that a recent 10% share-price rally occurred because of short-position covering of Intel stock.
We hope this doesn’t cause you to engage in short-squeeze fantasies. It would be difficult to confirm or deny the Mizuho analysts’ short-covering hypothesis, since many factors influence stock-price movements.
Besides, Intel stock certainly isn’t a meme stock that can easily be moved by retail short-squeeze traders. Also, the Mizuho analysts evidently aren’t very enthusiastic about Intel.
The analysts opined that Intel has a “lack of exciting growth.” On top of that, they declared, “No [long only] investors like or want to buy INTC, so a true rebound beyond mid $30s is unlikely in my view in coming months.”
Intel Stock: Prepare for Volatility, Not a Squeeze
So, what should Intel’s investors expect in the coming months? For one thing, don’t bet your money on a massive short squeeze.
As investors figure out how to assess the AI PC market’s future prospects, don’t be surprised if Intel stock chops around for a while. It could be frustratingly jerky and directionless for quite a while.
Volatility is more likely than a moonshot, so there’s no immediate need to load up on Intel shares. In the final analysis, prudent traders can simply choose not to invest in Intel until the risk-to-reward balance is more favorable.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.