Shares of Intel (NASDAQ:INTC) have come under immense pressure over the last two months. About seven weeks ago in mid-April, Intel stock topped out just over $59. It’s since fallen more than 25% to current levels near $45. Does that make this semiconductor stock a buy or is it still one to avoid?
Source: via Intel
Intel definitely has some positives. For instance, it has a low valuation and a hefty dividend yield. That said, the chart for INTC is a mess and the company is lagging its competitors’ growth.
Let’s take a closer look at Intel stock price down at these levels.
Valuing Intel Stock
Like Nvidia (NASDAQ:NVDA) and unlike Advanced Micro Devices (NASDAQ:AMD), forecasts call for a deceleration in growth for Intel in 2019. While expectations call for a year-over-year drop in both earnings and revenue, it’s to a lesser extent than Nvidia. Further, INTC stock has the lowest valuation of the bunch.
Consensus estimates call for a 6.3% decline in earnings to $4.29 per share. That comes on a 3.1% drop in revenue down to $68.66 billion. Even with the bottom-line slowdown, the recent stock price decline leaves Intel trading at just 10.5 times earnings. That’s at the bottom of INTC’s valuation range over the last five years.
For 2020, current estimates are mixed. On the one hand, expectations call for a rebound in sales and earnings to the tune of 4.3% and 5.6%, respectively. The downside? That revenue is forecast to grow just 1% vs. 2018 sales and earnings are actually lower than 2018 levels.
After management’s 5% dividend increase in January, shares now yield 2.8%. Is this enough to draw in income investors or will they be waiting for 3%+ before getting excited?
It’s easy to not be that excited by Intel right now. After all, AMD has superior growth while Nvidia is considered a pioneer in the space. It leaves Intel somewhere in the middle, and without a catalyst, it’s hard to really get excited about INTC. At this valuation, Intel stock certainly becomes a bit more compelling. But if that’s the only driver, we may need some help from the charts.
Trading INTC Stock
On the charts, Intel has carved out a nice short-term bottom. Shares have closed north of $44 over the last three weeks, despite breaching below that mark each week. Investors who want to take a shot on INTC could do so with a stop loss near $42.75, just below the three-week low.
If support can hold, a 9% rally could be in the cards. That would take Intel stock price up to $48. There it will run into the 50-week moving average, the 200-day moving average and the 61.8% retracement for the one-year range. Given the recent sentiment around the stock, I don’t expect INTC to push through this level like a knife through hot butter.
Instead, it will probably act as resistance on its first attempt. Of course, that’s assuming the declining 10-week moving average doesn’t head off the rally first.
This $44-ish area has roughly served as range support over the past year, so it’s no surprise that it’s holding now. Should it give way though, a drop down to $41 could be in the cards. This price buoyed Intel stock in late 2017 and early 2018 and is also the level where Intel will yield 3%. A bit further below at $38.60 and trending higher is the 200-week moving average.
The bottom line: Watch $44. A close below could send INTC stock down to $41 and possibly the 200-week moving average. Above $44 and a rally to the 10-week moving average and potentially $48 is possible.
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