Autumn has been kind to Intel (NASDAQ:INTC). Since bottoming out at $44.55 in September, INTC stock rallied to a high of nearly $59 a share. All thanks to a solid earnings beat.
Earnings of $1.42 per share crushed expectations for $1.24. Revenue of $19.19 billion trounced $18.05 billion expectations. It even raised its full-year guidance to $4.60 on $71 billion sales. Analysts were only looking for EPS of $4.39 on sales of $69.43 billion for 2019 sales.
While that gives us a lot to like, there are two key issues that could hurt INTC stock, near-term.
- The stock has become overbought at double-top resistance with overbought extensions on relative strength, MACD, and Williams’ %R — the technical analysis oscillator showing the current closing price in relation to the high and low of the past N days. The last time these indicators were this overbought, INTC stock plunged from $59 to a low of $42.34.
- Intel has been letting down its customers, at least according to CEO Bob Swan.
As I see it, it’s best to avoid INTC stock for now, and look to buy on a pullback.
INTC is Seeing Fundamental Challenges
At the moment, INTC is experiencing delays in supplying CPUs.
“We’re letting our customers down, and they’re expecting more from us,” Swan said, as quoted by MarketWatch. “PC demand has exceeded our expectations and surpassed third-party forecasts. We now think the market is stronger than we forecasted back in Q2, which has made building inventory buffers difficult. We are working hard to regain supply/demand balance, but we expect to continue to be challenged in the fourth quarter.”
Competition is Chipping Away at Intel Stock
In fact, Advanced Micro Devices (NASDAQ:AMD) is quickly chipping away at Intel’s lead in the CPU market. AMD has already released several new products this year, including its high-end graphics card and third-generation Ryzen CPUs, giving it quite an edge over Intel.
One report found that in the first quarter of 2019, AMD with 23.1% market share, as compared to Intel’s 76.8% share, as I reported. By the third quarter, the market saw a sizable shift. Thanks to Ryzen, AMD now had 31.9% market share, as compared to 68.1% for Intel. Another report found that AMD is pulling in about 5% market share, and could double to 10% by the end of 2020 thanks to the launch of Epyc microprocessor, as I also reported here.
Bottom Line on INTC Stock
With plenty of fundamental and technical issues, I strongly believe investors should avoid INTC stock. As InvestorPlace contributor Vince Martin noted on Nov. 8, Intel stock is now fairly valued, after the rally had gone about as far as it could. “Put another way, Intel is the biggest company in the semiconductor industry. But for several years, it hasn’t been the best, and Q3 earnings alone don’t fix that problem. Until it’s fixed, it’s going to be difficult for INTC stock to drive a sustainable rally from current levels.”
Again, it’s best to avoid INTC stock at the moment.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.