Intel Stock Looks Expensive

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Intel Stock Looks Expensive

Intel Stock Looks Expensive. Is It Still A Buy?

Intel (INTC) lost around $11.3 billion over the past year. That's very unusual for a company like Intel, which has been profitable for so many years.

Despite this, Intel is still trading 350% higher than its 52-week low. Also, Intel's stock price is trading at a forward P/E of 62. So, what's going on with the Intel stock price when it is at a loss?

Intel Has $550 Billion Market Cap

It looks like investors don't believe that Intel's losses will stay like that for the long term. After all, that's the only reason why this company has a market cap of $550 billion.

We can actually trace the loss back to $12.5 billion worth of non-cash. It is a mark-to-market charge on the Intel shares. These shares are held in escrow for the USA government as part of the CHIPS Act. The losses during Q1 also had the same pattern.

So, if we keep these aside, it is clear that Intel is actually profitable. Its non-GAAP net income during Q1 was $1.5 billion and around $2.2 billion in Q2.

Also, gross margin during Q1 was 39.4% and around 40.4% in Q2. So, even that's improving, and it is a good sign. The Intel CEO also said that demand is not the concern at all. The only thing holding them back is the supply.

The only problem is Intel's foundry business. It makes chips for Intel and other companies. Intel's other businesses are already making good money. However, the foundry lost $2.1 billion in Q2. This works out to around $8 billion in annual losses.

The biggest issue is that Intel still doesn't have many outside customers for its foundry. The foundry's revenue was $5.8 billion. Out of that, only $293 million came from external customers. Also, the new 14A manufacturing process of Intel will only enter large-scale production in 2028 or later.

With all things considered, it doesn't make sense to buy Intel stock at the current price. It is just too expensive, and a lot is hanging on the foundry payoff, which can take many years.

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