Intel’s streak of misfortune ends; the company forecasts net profit in the next quarter

Intel Corp. (NASDAQ: INTC) shares have fallen by about 55% since the beginning of 2024. The company faces significant challenges, lagging behind Advanced Micro Devices Inc. (NASDAQ: AMD) and NVIDIA Corp. (NASDAQ: NVDA). It ended Q3 with a 2 billion USD loss. This may represent an even more significant setback than the dot-com crisis, during which the entire technology sector collapsed due to declining semiconductor demand. Can Intel regain its position in the market?

The article explores Intel’s situation, the reasons for its stock decline, and whether there are grounds for buying it. It includes a fundamental analysis of Intel’s report and a technical analysis of INTC stock, forming the basis for Intel’s 2025 stock forecast.

About Intel Corp.

Intel Corp. is a US technology company that develops and produces microprocessors, chipsets, GPUs, systems-on-a-chip, network controllers, modems, flash memory, Wi-Fi and Bluetooth chipsets, and sensors for vehicle automation. Founded in 1968 by Gordon Moore and Robert Noyce, Intel introduced the world’s first microprocessor in 1971, laying the foundation for its future success. In the same year, Intel went public on the NASDAQ under the ticker symbol INTC, becoming one of the first in the emerging technology sector.

Challenging times for Intel: dot-com bubble, the pandemic, and competition struggles

The company faced its first major setback during the dot-com bubble in 2000, as demand for PCs and servers plummeted. Failing to anticipate this downturn, management ramped up production, resulting in an oversupply and declining prices. As a result, Intel was forced to scale back production, cut costs, and develop a recovery program. Following the crisis, the technology market rebounded, reigniting demand for Intel’s products and helping the company recover from the downturn.

The next major test came in 2021. A surge in demand for semiconductor products during the COVID-19 pandemic in 2020 boosted production, leading to market oversaturation. This eventually resulted in falling prices and, in turn, a decline in Intel’s revenue. However, the company’s challenges did not end there.

In 2023, Intel faced intensified competition from AMD and NVIDIA, whose products outperformed Intel’s processors and graphics solutions in both performance and energy efficiency. Intel’s former management’s focus on optimising the business strategy and financial performance at the expense of engineering investment may have contributed to the erosion of its competitive edge. This approach delayed the transition to more advanced 7- and 5-nanometer technologies, which competitor Taiwan Semiconductor Manufacturing Company (NYSE: TSM) has already mastered (TSMC produces chips for NVIDIA and AMD).

Investors’ reaction to the company’s difficulties was obvious – they dumped Intel shares. During the 2000 dot-com crisis, the company’s stock dropped by 82%. The current situation is similar, with the stock losing 70% of its value from its peak in April 2021 to November 2024.

Intel is increasing investments in new factories and equipment upgrades for foundry operations to restore investor confidence and preserve its market share. This strategic move temporarily reduces profitability (the company posted losses in Q1 and Q2 2024). To optimise expenses, Intel’s management plans to lay off up to 15% of its workforce.

Intel Corp. Q3 2024 report

Intel released its Q3 2024 report on 31 October, revealing the following key financial indicators:

1. Revenue: 13.3 billion USD (-6%)
2. Net income (loss): 2.0 billion USD compared to 1.7 billion in Q3 2023
3. Earnings (loss) per share: 0.46 USD compared to 0.41 USD in Q3 2023
4. Gross Margin: 18.0% (-2,780 basis points)

Revenue by segment:

1. Client Computing Group: 7.3 billion USD (-7%)
2. Data Center and AI: 3.3 billion USD (+9%)
3. Network and Edge: 1.5 billion USD (+4%)
4. Intel Foundry: 4.4 billion USD (-8%)
5. All other: 1.0 billion USD (-28%)

In her comments on the Q3 2024 report, Intel’s CEO, Pat Gelsinger, noted that the company’s profitability was impacted by expenses previously mentioned during the Q2 2024 results discussion. Nevertheless, Q3 results exceeded projections. In Q3, Intel took steps to reduce costs, enhance efficiency, and strengthen its market competitiveness. A significant portion of the workforce reduction program was also implemented, with plans to lay off an additional 15% of employees by year-end.

The financial results were also impacted by write-offs for outdated COVID-19-era products that could not integrate with current systems.

Management holds an optimistic outlook for Q4 2024, with projected revenue between 13.3 and 14.3 billion USD and adjusted EPS at 0.12 USD, suggesting profitability is achievable.

Despite current losses, Intel encourages shareholders to retain their shares and has paid a Q3 dividend of 0.12 USD per share.

Technical analysis and forecast for Intel Corp. shares

Intel’s loss of competitive edge severely impacted its stock price, pushing it to its lowest point since 2015. The descending channel indicates the ongoing decline of the shares, suggesting further downside potential to 14 USD. However, an increase in trading volume signals investor interest in the stock even at its current levels. Based on Intel stock’s current performance, two scenarios for 2025 can be considered.

An optimistic forecast for Intel stock suggests that the price could test the 20 USD support level, rebound, and rise to 30 USD. A break above this resistance level could open further upward movement to 41 USD. This forecast is a priority, as the company’s management is confident about improving financial performance.

A negative forecast for Intel stock predicts a drop below the 20 USD support level, followed by a decline to 14 USD. Subsequently, a rebound from this level could catalyse renewed growth, targeting the 30 USD resistance level.

With less than two months left until the end of the year, these targets mentioned in the Intel stock forecast could materialise as early as 2025.

Analysis and forecast for Intel Corp. stock for 2025

Summary

The global semiconductor market’s primary producers with innovative technologies are TSMC (Taiwan) and Samsung Electronics (South Korea). They source their lithography equipment from the Dutch company ASML. Currently, all key players in the semiconductor market are located outside the US. The US government enacted the CHIPS Act precisely to address this shortcoming, with plans to allocate 8 billion USD to Intel to establish it as the flagship of the semiconductor market in the US. In this context, Intel’s shares have depreciated to a level that could attract long-term investors, provided that the US successfully implements measures to reduce dependence on external manufacturers.

Despite all this, the actual funding and execution of these initiatives are being delayed, heightening Intel’s uncertainty. Pat Gelsinger stresses the need for swift action, emphasising that any delay in providing support could adversely affect the company’s ability to compete effectively with the industry’s leading players.

However, even with the seemingly inevitable rise in Intel’s shares, the company still faces significant obstacles on its path to leadership, especially given that its competitors are not standing still either.