Intel Is Up 570% in the Past Year. Time to Buy the Comeback Story or Take Profits?
A new partnership with Apple sent the stock skyrocketing, but has the upside already been priced in?
By Keithen Drury
Few stocks have had a better comeback story than Intel (INTC 2.52%) over the past year. If you were bold enough to buy stock in a company that was quite frankly failing at this time last year, you're up around 539% on your investment. Intel has seen several positive catalysts over the past year, which have resulted in a booming stock price.
Has all of the upside been priced into the stock, or is there more room to go? Let's take a look at what's ahead for Intel, and whether it's time to take profits or stick around for more.
Intel's backers have resulted in new business
Intel has had two major investors come alongside it over the past year that have boosted sentiment around the stock: The U.S. government and Nvidia. Both investors injected new capital into Intel, allowing it to revive its foundry business.
That revival looks to have paid off, as President Donald Trump recently announced that Apple has agreed to use some of Intel's foundry capabilities for its chips. That's a huge client win, and if Intel can truly capture some of Apple's business, it will lead to strong growth.
It needs that because right now Intel is trading on expectations of a revival, not actual results. In Q1, Intel's revenue rose 7% year over year, and it posted a net loss of $3.7 billion. That's not really the results you'd expect from a company whose stock has risen so much over the past year, and it suggests Intel needs some serious wins to become a viable investment again. That may have come with Apple, but is it already priced into the stock?
Intel now trades at a premium price tag of 129 times forward earnings and 91 times 2027 earnings estimates.
Data by YCharts.
These P/E ratios are very expensive for a stock that hasn't really seen much improvement, even though there's been a lot of fanfare surrounding the company. Although the market has shot Intel's stock up rapidly, the turnaround story will play out over a long time frame. The market has already deemed Intel a success story and crowned it a champion, which raises red flags for me.
I think there is a bit too much hubris in Intel's stock, and there are far better chip stock options out there. While I am cheering on the Intel turnaround and believe it's important to do so, I don't have to invest in the stock to make it happen.