In January, Intel (INTC +0.86%) reported earnings that weren't all that great. While the company generated decent numbers, there were big question marks about how it would be able to meet the surging demand for chips. As a result, the stock proceeded to fall on the news. While it has been recovering recently, as of Monday, it was still down around 10% from where it was before it released its earnings numbers.
With so much demand for chips and growth potential out there, plus the government also investing in Intel, could this be a great time for investors to load up on this tech giant?
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Intel's outlook for the year disappointed investors
In Intel's most recent quarterly earnings report (for the quarter ending Dec. 27), the tech company did rather well, as it beat expectations on both the top and bottom lines. Revenue of $13.7 billion was higher than analyst projections of $13.4 billion, and its adjusted per-share earnings of $0.15 was better than expectations of only $0.08. But it was the company's revenue guidance for the current quarter that was of concern for investors. It came in slightly below the midpoint of what analysts were expecting ($12.2 billion versus $12.6 billion).
The company is facing supply constraints, suggesting that it is struggling to meet demand. Management expects supply to improve as the year goes on, but the news has nonetheless weighed on investors' outlook for the stock. Another concern is that the company's chief financial officer, David Zinsner, says that increased memory prices could impact the business in the latter part of the year.
NASDAQ: INTC
Key Data Points
Is Intel stock worth buying at its current levels?
Although Intel's stock is down since the earnings report, the sell-off isn't significant enough that it looks like a deal. The stock is still trading at an incredible 90 times its estimated future profits. That's an extremely high multiple for any stock, let alone one that's struggling to generate growth. While Intel beat expectations last quarter, its revenue declined by 4% on a year-over-year basis. Its operating margin was a paltry 4% of the top line, and the company incurred a net loss of $591 million.
Intel is a risky turnaround play to invest in. The stock has soared more than 150% over the past 12 months, and with an inflated valuation, it may not be easy for it to meet expectations in future earnings reports. There are far better growth stocks out there than Intel; it's arguably not worth the risk, and it could be vulnerable to a correction in the near future.
