Intel Stock is Now Within the Bear Market Threshold

September 12, 2018
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Intel (NASDAQ: INTC), the world’s second largest semiconductor chip manufacturer, has just fallen into what analysts define as bear market territory.

Suffering from sustained losses in recent weeks, Intel fell again by 2.96% at the close of trading on Tuesday. This puts stock into negative territory for the year to date. It has been two years since the company was last in its own bear market. Analysts define a ‘bear’ as any stock that falls more than 20% below its last closing peak in a bull market. It has now lost value for six consecutive sessions. Almost ten years ago, the company was trading at over $57.08 per share. Today, stock is trading at $44.93.

What is Causing the Fall in Investor Confidence?

Chip shortages are a leading factor in Intel’s ongoing stock price collapse. The company’s 14nm manufacturing process is cutting edge, allowing it to create microprocessors that are faster and more efficient than any that it has produced in the past. The problem for Intel is that supply is almost 50% short of demand. This could cause Intel to outsource some of its production, which could lead to delivery delays and additional costs.

Earnings have not been a problem. In fact, at the end of FY17, the company grew sales by 5.68% and profits grew by 8.33%. With a profit margin of 62.07%, there is no question that Intel is well managed and fiscally sound. The last quarterly earnings exceeded expectations, yet stock prices still fell.

AMD’s Success is Not Helping

Another reason for Intel’s fall from stock market grace is the ongoing rise of AMD (NASDAQ: AMD), the closest competitor in the semiconductor industry. AMD has recently emerged from a period of stagnation with new products that compete on both performance and price. AMD’s financial growth is outpacing Intel by a huge margin. At the end of FY17, the competitor grew revenue by 24.74%. Profits were up 82.67%.

Investors are currently flocking to AMD, which broke its $30 price target on Tuesday. AMD stock value has grown 192.80% year to date.

What Should You Do with Your Intel Stock?

Most analysts recommend a HOLD on Intel stock in September. That means no buying or selling for current and potential investors. Intel value is definitely declining, but this is largely due to stronger competition from AMD as well as supply constraints with current products.

The company is well managed and fiscally responsible. An upturn could be incoming, particularly considering the strong performance across the rest of the NASDAQ. Investors would be wise to follow the news closely while avoiding panic sales without looking at their investment within the context of their entire portfolio.

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