After a stellar performance in 2023 that saw shares rising 90%, Intel (INTC +2.35%) is off to an ominous start in the new year, losing more than 6% of its value as of this writing.
The drop in Intel stock may initially seem a bit surprising in the absence of any company-specific information that could have negatively impacted investor sentiment. However, savvy investors may be asking if the recent pullback in Intel stock could be used as an opportunity to buy more shares of the chipmaker considering that it is set for a turnaround in 2024.
Let's check if that could indeed be the case.
NASDAQ: INTC
Key Data Points
Intel stock is attractive right now
Intel currently trades at 3.7 times sales, which is slightly higher than the stock's five-year sales multiple of 2.8. However, the recent pullback has brought down its forward sales multiple to just under 3. What's more, the stock is now trading at around 17 times forward earnings, which is lower than its five-year average forward earnings multiple of 20.
It is also worth noting that Intel's forward earnings multiple is lower than the Nasdaq-100's forward earnings multiple of 28 (using the index as a proxy for tech stocks). So from a valuation perspective, Intel looks attractive right now, especially considering that its earnings are anticipated to more than double in 2024 to $1.90 per share from last year's estimate of $0.87 per share.
INTC EPS Estimates for Current Fiscal Year data by YCharts
What's more, as the chart above indicates, analysts have been raising their earnings expectations for Intel. With such impressive earnings growth in the cards, buying Intel stock on dips looks like a no-brainer considering the valuation and the company's catalysts.
Focus on AI-driven opportunities could supercharge growth
While a recovery in sales of personal computers (PCs) this year will be a key growth driver for Intel in 2024, the company is focusing on the growing adoption of artificial intelligence (AI) to ensure that it can keep growing at a nice pace over the long haul. This explains why Intel recently announced a new family of AI-enabled chips for the automotive market that will allow OEMs (original equipment manufacturers) to bring generative AI-powered experiences to vehicles.
These AI-enabled features include voice assistants, video conferencing capabilities, and even gaming for rear-seat passengers. Intel points out that users can ask the car to perform functions they want with the help of generative AI instead of scrolling through menus. Intel has already landed a customer for its automotive AI chips in the form of Zeekr, an electric vehicle brand owned by Geely Automotive of China.
It wouldn't be surprising to see more customers opting for Intel's automotive AI solutions, as the adoption of generative AI in this market is anticipated to grow at an annual rate of almost 40% through 2027, generating close to $16 billion in annual revenue. So Intel is doing the right thing by making a move into this market given the solid opportunity that this could offer in the long run.
This automotive-related development comes on the heels of other significant announcements made by Intel to target the AI market. Last month Intel revealed the Gaudi3 chip for accelerating AI workloads in data centers. Chipzilla says that this chip will go after Nvidia's H100 AI processor, which is currently in massive demand thanks to its ability to train large language models (LLMs).
Intel is promising that the Gaudi3 will deliver a 4x jump in computing performance, a 2x jump in networking speed, and a 1.5x increase in bandwidth compared to the existing Gaudi2. As a result, it wouldn't be surprising to see Intel's AI revenue pipeline increasing further following a big jump in the third quarter of 2023, when management pointed out that the company has almost doubled its pipeline of Gaudi customers in just 90 days.
These developments could lead analysts to further increase their revenue growth expectations from Intel following a couple of increases in the last three months.
INTC Revenue Estimates for Current Fiscal Year data by YCharts
In all, Intel's future seems bright, and this explains why Wall Street analysts have been upgrading the stock of late. Investors would do well to capitalize on this semiconductor stock's latest dip since it could regain its mojo and head higher as the year progresses.
