Should You Too Buy INTC Stock Here?

Intel (INTC) stock is a shining example of how fast things can move in stock markets. In 2024, the chip giant fell 60% to log its worst-ever year in its over five-decade-old history as a listed company. However, the company’s fortunes changed last year, and while it dipped to a multi-year low, it closed the year with gains of 84%. The rally has continued into 2026, and the stock is up over 60% for the year despite all the noise over the war in Iran and soaring energy prices. INTC stock has more than tripled from its last year’s lows in what has been a remarkable turnaround.

Several factors have supported Intel’s rally. Last year, within a span of a few weeks, SoftBank (SFTBY) and Nvidia (NVDA) announced billions of dollars in investment in the company, while the U.S. government converted its grants into equity, taking a nearly 10% stake in the company in the bargain.

These investments helped bring the much-needed cash to Intel’s coffers and somewhat addressed the issue of cash burn. Another issue the company was facing was regarding its foundry business, where it hadn’t been able to secure major customers despite plowing billions of dollars.

However, there has been some progress on that front, and the company has joined Elon Musk’s ambitious “Terafab” project to develop and manufacture advanced artificial intelligence (AI) chips for Tesla (TSLA), SpaceX, and xAI. The partnership looks like a watershed moment for Intel and is a strong validation of its foundry capabilities.

Intel is also reportedly in talks with Alphabet (GOOG) (GOOGL) and Amazon (AMZN) for advanced chip packaging services. While these reports are not confirmed, and rumors of Intel partnering with Apple (AAPL) have been doing the rounds for the last few months, the current reports look a lot more credible if we connect the dots. During the Morgan Stanley TMT conference last month, Intel CFO Dave Zinsner said, “We’re actually close to closing some deals that are in the billions of dollars per year in terms of revenue on packaging.”

With foundry deals and capital raises, Intel has addressed two of the issues that had been plaguing the company and, by extension, its stock price. Meanwhile, another factor that helped spur the rally in Intel was its really cheap valuations, where it was even trading below its book value at the trough and looked like a bargain. The multiple has since risen to nearly 2x amid the monster rally in INTC stock.

In terms of earnings-based multiples, Intel would appear bloated at a forward price-to-earnings (P/E) multiple of nearly 900x. However, the multiples have been distorted by the current compression in Intel’s earnings. The company’s earnings are expected to improve significantly in 2027, with consensus estimates calling for earnings per share (EPS) to rise by over 766% to $0.52, which gives us a 2027 P/E of 113x. While the number would still appear quite high, it should normalize further in the coming years as the company’s earnings continue to improve.

Wall Street has also been taking note of Intel’s improving fundamentals, and earlier this week, Wells Fargo raised its target price from $45 to $55, while KeyCorp raised its from $65 to $70. However, the average sell-side analyst is still on the sidelines when it comes to Intel, and 34 of the 44 analysts polled by Barchart rate INTC stock as a “Hold” or some equivalent. The stock also trades well ahead of its mean target price of $46.79, which I believe is in part due to the lag effect in analyst action.

As I have noted previously, onshoring chip production is a structural story given the growing importance of chips amid the AI pivot. Intel stands out in that regard with its foundries situated in the Western world.

Intel bet on the foundry business at the right time but wasn’t able to sign up major customers for its foundries. If the company can sign up more customers for that business while continuing to innovate in its in-house AI chips, it could see much better days ahead.

All said, the company’s track record on innovation and execution has been patchy, and while foundry partnership announcements could keep triggering rallies, I am not inclined to add more shares at these levels even though I continue to stay invested in INTC stock.

On the date of publication, Mohit Oberoi had a position in: INTC, NVDA, AAPL, GOOG, AMZN. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com