INTC Stock Before Q3 Earnings Release: To Buy or Not to Buy?

Earnings and Estimates - Intel is scheduled to report Q3 2024 earnings on Oct 31, with Zacks Consensus Estimate for revenues at $13.01 billion and a loss of 3 cents per share [1] - Earnings estimates for 2024 have declined from 33 cents to 27 cents per share, and for 2025 from $1.08 to $1.07 per share over the past 60 days [1] - The company has a four-quarter average earnings surprise of 19.1%, beating estimates thrice, but had a negative 80% surprise in the last reported quarter [3][4] AI and Technology Developments - Intel collaborated with IBM to deploy Gaudi 3 AI accelerators in IBM Cloud, aiming to improve visibility, control, and cost-effective scaling of enterprise AI workloads [6] - The company is scaling its AI footprint to edge devices and PCs with Core Ultra processors, supporting over 100 software vendors and 300 AI models [7] - Intel introduced Core Ultra 200V series processors, marking a significant advancement in x86 processor technology with improved graphics, security, and power efficiency [7] - The company extended its collaboration with AWS, involving a multi-year, multi-billion-dollar framework for custom chip designs, including an AI fabric chip using Intel 18A process node [8] Market and Competitive Landscape - Intel faces potential market restrictions and increased competition from domestic chipmakers in China due to Beijing's push for technological self-sufficiency [8][9] - The company is witnessing intensifying competition in server, storage, and networking markets from rivals like AMD and NVIDIA [9] - Over the past year, Intel's stock has lost 31.3% against the industry's growth of 187.6%, lagging its peers [10] Valuation and Investment Considerations - Intel's price/sales ratio is 1.74 forward sales, lower than the industry's 17.52 and the stock's mean of 2.72, indicating it is relatively cheaper [10] - The company's innovative AI solutions, including Gaudi and Core Ultra platforms, are designed to deliver flexible, secure, and cost-effective AI solutions, positioning Intel as a leader in AI [11] - Intel's strategy for open, scalable AI systems extends beyond hardware, encompassing software, frameworks, and tools, fostering a broad ecosystem of AI players [12] Challenges and Risks - China's directive to phase out foreign chips from key telecom networks by 2027 could significantly affect Intel, as it derives a significant portion of its revenues from China [8] - Increasing competition from established players and emerging China-based firms is likely to adversely impact Intel's bottom line [11] - Despite recent product launches, Intel's declining earnings estimates and poor price performance compared to peers have led to negative investor perception [12]