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With a YTD loss of 57%, Intel (INTC) is one of the worst-performing S&P 500 Index ($SPX) stocks this year, with its decline surpassed only by Walgreens (WBA). While 2024 has been particularly painful for INTC investors, the stock’s long-term performance leaves little to boast about. The stock is in the red for the last 3-year, 5-years, and 10-year periods, while INTC is just barely in the green over the last two decades.
Intel is one of those dot-com era companies that has never revisited the highs that they hit during that period. Specifically, Intel hit an all-time high of $75.81 per share on Aug. 23, 2000, and currently trades at just over a quarter of that price level.
Intel’s Q2 earnings were a disaster, and the stock fell almost 30% after it missed topline and bottom-line estimates. The stock has recovered from its 2024 lows, but hasn’t been able to win back investors’ faith. In this article, we’ll look at Intel’s 2025 forecast, and explore whether the company – which once dominated the U.S. chip industry – can recover from these lows and regain its mojo.
Intel Intends to Cut Its Costs and Capex Over the Next Year
During its Q2 earnings call, Intel announced a flurry of measures to cut costs and strengthen its balance sheet. The company cut its 2024 capex by 20%, and now expects the outlay to range between $25 billion to $27 billion. Management is looking to cut the capex further, to between $20 billion and $23 billion, in 2025.
Operating expenses are also coming under the knife, with Intel targeting the metric at $17.5 billion in 2025, 20% below its previous forecast. It has announced a 15% cut to its workforce, which it intends to complete by the end of 2025.
Overall, the company is targeting $10 billion in direct savings, spread between cost of sales, operating expenses, and capex. CEO Pat Gelsinger said that the plan “provides clear line of sight to a sustainable model with the ongoing financial resources and liquidity needed to support our long-term strategy.”
Intel also suspended its dividend to conserve cash. Separately, B. Riley (RILY) and Burberry (BURBY) have also suspended their dividends to preserve capital over the last month.
Intel Stock 2025 Forecast
While Intel’s Q2 earnings were a washout and the stock had its worst day in five decades, management tried to paint a positive picture of the business in 2025 and beyond. In fact, the term “2025” popped up 15 times during the earnings call, while “2026” was mentioned three times.
The company is particularly bullish on the artificial intelligence (AI) PC category, and said that it is on track to deliver over 40 million AI PCs by the end of this year. Intel expects cumulative shipments to rise to over 100 million by the end of 2025.
Analysts Rate INTC Stock as a “Hold”
As expected, analyst sentiment toward Intel stock - which was quite tepid already - soured even further after the disastrous Q2 earnings. Just over 11% of the analysts covering Intel rate it as a “buy” or higher, while the corresponding number 1 month back was nearly 18%.
INTC has a consensus rating of “hold” from the 35 analysts covering the stock, while the mean target price of $29.51 is nearly 38% higher than Wednesday’s closing prices.
Is Intel Stock a Good Long-Term Buy?
Intel is working on a two-pronged strategy, and aspires to be a combination of Nvidia (NVDA) and Taiwan Semiconductor Manufacturing Co. (TSM). To that end, Intel is working on its own advanced chips – including AI chips - while also setting up foundries to capture the onshoring of chip production.
The foundry business has been a big drag on its earnings, losing $7 billion last year. The segment’s losses have only increased, and came in at $2.8 billion in Q2. Gelsinger believes that losses in the foundry business will peak in 2024, and expects the segment to break even at the operating profit level “midway between now and the end of 2030” - which is roughly 2027.
Intel has set some ambitious targets for itself as it looks to become the second-largest foundry globally by 2030, and expects the business to post operating margins of 30%.
To be sure, the stars are well-aligned for chip manufacturing onshoring - including in the U.S., which passed the CHIPS Act in 2022 to spur domestic chip production. Intel is, in fact, the biggest beneficiary of the Act, and will gain billions of dollars in funding.
Intel Stock Should Recover in 2025
All said, I believe there is no easy fix for Intel, given the competition it is facing in all lines of business. While its data center customers are pivoting to AI chips, Advanced Micro Devices (AMD) is giving it a tough fight in the PC segment.
However, I won't give up on the company yet, as the worst seems behind it after the Q2 earnings call. While Intel's next 12-month (NTM) price-to-earnings multiple of 58.6x looks quite elevated – and is even higher than that of Nvidia – it does not reflect the true picture, as the earnings are currently subdued. Intel's price-to-sales multiple fell to its lowest level ever last month, which reflects the pessimism towards the company.
While corporate turnarounds are seldom easy, I believe selling Intel here might not be prudent. I would instead wait for the next few months to see how the company progresses on the turnaround and cost-cut plan.
On the date of publication, Mohit Oberoi had a position in: INTC , NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
