To be fair, Intel is not the only chip company that’s having a tough time this year.
But Intel has been a laggard for longer. Shares are now trading at their lowest level since May 2016. The stock is down more than 25% in the past five years while the SOX has more than doubled, Nvidia is up nearly 200% and AMD has soared more than 400%.
Can newish CEO Pat Gelsinger (he took over in 2021) turn Intel around? Investors may give Gelsinger more time to get the company back on track.
One fund manager who owns the stock thinks Gelsinger will be able to return Intel to its former glory. But he said it will take time and that investors don’t need to rush into the stock just yet.
“I don’t think there is a sense of urgency to buy. But longer-term, I think Intel will right the ship,” said Jeff Travis, portfolio manager of Oak Associates Funds. Travis owns Intel in the Red Oak Technology Select fund.
Travis does think that semiconductor stocks are still a good “secular growth industry” and that valuations are now attractive given how sharply the stocks have fallen.
“There have been a string of negative industry data points,” the analysts noted, pointing to cautious comments about demand from Intel, AMD and Nvidia in recent weeks. The Goldman analysts added that there is “weakness across the PC, enterprise server, and smartphone end-markets.”
So it may be soon to call a bottom for the major chip companies just yet.
Shocktober or Rocktober for stocks?
Could the market bounce back in October, though? Sure, the month that ends with Halloween has a bad reputation for being a scary one for traders. Wall Street has had some historic plunges in October. Think 1929, 1987 and 2008 for example.
But these massive October sell-offs are actually anomalies. Stocks often enjoy strong year-end rallies, as investors bet on healthy earnings growth and strong consumer spending during the holidays.
Most major corporations will report earnings for the third quarter in October…and that means they may also give updated outlooks for the fourth quarter and provide some first glimpses about what they are expecting for sales and profits in 2023.
Analysts have already cut their forecasts for the third quarter pretty substantially in the past few weeks. According to data from FactSet, Wall Street now is predicting earnings growth of just 3.2% for the third quarter.
If they need to start slashing estimates for the end of this year and next year as well, that could push stocks even lower.
“There is more downside risk for US stocks,” said Luke Tilley, chief economist and head of asset allocation and quantitative services for Wilmington Trust Investment Advisors.
Up next
Monday: Germany GDP
Friday: End of third quarter; US PCE inflation; US personal income and spending; US U. of Michigan consumer sentiment; China PMI; India interest rate decision; earnings from Evergrande
