Intel shares remain in a bear market even though the company raised full-year guidance

Intel shares remain in a bear market even though the company raised full-year guidance
Written by:
Stanko Iliev
January 12, 2021
  • Intel shares have been moving in a downtrend since the middle of February
  • The first sign of the trend reversal will be if the price jumps above the $60 resistance
  • Intel will face challenging 2021 amid concerns in the manufacturing of its new processors

Intel (NASDAQ: INTC) shares have underperformed in the 2020 year due to worries around its process delays and news that Microsoft is working on its own chips. Technically looking, Intel shares remain in the bear market, and the first sign of the trend reversal will be if the price jumps above $60 resistance.

Fundamental analysis: Intel will face challenging 2021 amid concerns in the manufacturing of its new processors

Intel shares have been moving in a downtrend since the middle of February, and the current price of this stock stands around $49.8. Shares of this company remain under pressure due to worries around its process delays and news that Microsoft is working on its own chips.

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This December, Microsoft has reported that it has started to work on new in-house chips for its cloud servers and Surface PCs. Intel dominates server chips with about 94% of the market share but had already started to lose share in the server chips market.

Morgan Stanley announced recently that the company would face challenging 2021 amid concerns in the manufacturing of its new processors. Despite this, Morgan Stanley has an equal-weight rating on the Intel shares, with a price target of $60.

“The numerous delays in the manufacturing technology for both the 10 nm and 7 nm processors have been a significant impediment to the company. Outsourcing manufacturing to Taiwan Semiconductor Manufacturing would likely be accretive to Intel’s margins and cash flows”, Morgan Stanley said.

It is also important to mention that Daniel Loeb’s Third Point expressed concerns about the company’s market share and warned that Intel should consider strategic alternatives. According to Third Point, these strategic alternatives should include a potential separation of Intel’s manufacturing business (Third Point has a nearly $1B stake in Intel).

The positive news is that Intel raised full-year guidance and sees revenue of $75.3B vs. $75B prior guidance. The company also raised the full-year EPS estimate from $4.85 to $4.90, which confirms the company’s stability.

This company’s fundamentals are very good; the company will not face cash flow problems, and at the current stock price, this company is not overvalued.

Technical analysis: The first sign of the trend reversal will be if the price jumps above the $60 resistance

Technically looking, Intel shares remain in the bear market, and the first sign of the trend reversal will be if the price jumps above $60 resistance.

Data source: tradingview.com

The critical support levels are $44 and $40; $52, $56, and $60 represent the resistance levels. If the price jumps above $52, it would be a signal to buy shares, and the next target could be around $55, but if the price falls below the $40 support level, it would be a firm “sell” signal.

Summary

Intel shares remain under pressure due to worries around its process delays and news that Microsoft is working on its own chips. The positive news is that Intel raised full-year guidance and sees revenue of $75.3B vs. $75B prior guidance.