Intel: Still Likely To Underperform

Summary:

• The market is more confident on Intel’s earnings than revenues due to headcount reductions and slower-than-expected uptake of Gaudi 3.
• Management has promised positive adjusted FCF by 2025. However, I am more concerned with GAAP positive FCF, which is not expected to occur over the next 3 years.
• Intel’s Valuation multiples are still above longer term median levels. Due to its worse competitive position, I don’t believe Intel deserves a premium over its historical valuation range.
• Relative technicals show no signs of multi-quarter bullishness. The incumbent downtrend is still strong and intact.
• Biden’s government has reduced the direct funding to Intel under the CHIPs Act. And the incoming Trump administration may curtail this further as a result of preferring tariffs over subsidies to support the US semiconductor industry.

Performance Assessment

Intel (NASDAQ:INTC) has formed a bit of a base over the last quarter, giving pause to its overall decline. Hence, my ‘Sell’ view has underperformed vs the S&P500 (SPY

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