Intel (Nasdaq: INTC) is a giant in the semiconductor industry, known for designing and manufacturing the computer chips that power everything from laptops to data centers. But lately, this tech titan has been struggling to keep up with its faster-moving rivals.
Looking at Intel’s stock chart, we can see it’s been on a wild ride.
After hitting highs around $50 in late 2023, the stock has taken a nosedive, falling below $25 in recent months. This steep drop has many investors wondering whether Intel is now a bargain or a value trap.
Let’s run the stock through The Value Meter to find out.
First, we’ll look at Intel’s enterprise value-to-net asset value (EV/NAV) ratio. This tells us how much investors are willing to pay for the company’s assets. Intel’s EV/NAV sits at just 1.03, way below the average of 6.35 for similar companies.
But before you think this might make Intel look like a screaming “Buy,” here’s where things get tricky… Over the past year, Intel’s free cash flow has been a big problem.
The company only managed to generate positive free cash flow in one of the last four quarters. On average, its free cash flow was negative 2.83% of its net assets. While that’s not great, it’s better than the -13.1% average for companies with similar cash flow struggles.
Intel is in the middle of a massive turnaround effort. The company is spending billions to upgrade its manufacturing facilities and catch up to rivals in chip technology. This has put a big squeeze on Intel’s profits and cash flow.
In its latest quarter, Intel reported revenue of $12.8 billion, down 1% from the previous year. The company lost $1.6 billion, a stark contrast to the $1.5 billion profit it made a year earlier.
However, there are some glimmers of hope. Intel is making progress on its new chip designs and manufacturing processes. The company is also cutting costs, as it plans to reduce its workforce and suspend its dividend to save cash.
Intel’s low valuation reflects both the risks and potential rewards of its turnaround plan. If the company can successfully modernize its operations and regain its competitive edge, the stock could be a bargain at current prices. But if Intel continues to struggle, even the current low valuation might not be low enough.
For long-term investors who believe in Intel’s ability to right the ship, the stock might be worth a look… But be prepared for a bumpy ride. Intel’s turnaround will take time, and there’s no guarantee of success.
The Value Meter rates this one “Appropriately Valued.”
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