Key insights
- Intel's stock experienced a significant pullback this week, dropping 10% after a substantial rally, raising concerns about overvaluation. While still up significantly year-to-date, the decline brings it closer to Wall Street's consensus target. Analyst sentiment is mixed, with some favoring competitors like AMD, despite potential new business from Apple. Options pricing suggests traders anticipate an 8% move in either direction next week.
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Intel's stock took a big hit this week, bringing its record rally grinding to a halt. Could it signal more losses ahead, or leave the stock poised for a rebound?
The shares have fallen about 10% since the week began, making Intel (INTC) one of the biggest decliners in the S&P 500 this week, along with a number of other chip stocks amid some worries they may have climbed too high, too quickly. Even with its recent losses, Intel remains one the top gainers in the index for the year so far, up nearly 180% year-to-date and more than 400% over the last 12 months after a string of high-profile deals and signs of strong AI demand boosted optimism about a turnaround in its business.
Based on current options pricing, traders are now anticipating the stock could swing up to another 8% in either direction by the end of next week. A move of that size from Friday afternoon's level around $104 could see the shares rally back above $113, or slip as low as $96, giving up more of their gains this year.
Intel's pullback this week could be taken as a sign that some investors are wary its rapid rise may have left it overvalued.
The recent slide in Intel's stock has dragged it closer to Wall Street's consensus target around $95, per Visible Alpha data. Of the seven analysts with current ratings tracked by Visible Alpha, just three have said they consider the stock a "buy," compared to three neutral, and one sell rating.
Among those who have hesitated to recommend buying the shares, including Deutsche Bank, UBS, and Bank of America, some have voiced concerns that Intel's rapid rise may have pushed its stock ahead of its fundamentals. Jefferies, which has also maintained a "hold" rating on the shares, has also suggested that rivals such as Advanced Micro Devices (AMD) could be stronger choices, anticipating bigger gains from the same AI-related tailwinds.
Still, reports that Intel could be close to securing Apple (AAPL) as a new customer for its foundry business, or win contracts from other companies, could stand to inject fresh enthusiasm into the shares. Such a deal would mark a major milestone in the company's efforts to attract new customers.