Semiconductor stocks have taken even more damage than the overall market, thanks to what certainly seems like a perfect combo of macro headwinds. Supply-chain disruptions, a looming economic contraction, and other nearer-term issues have made the chip stocks falling knives at this juncture. Nonetheless, in this piece, we leveraged TipRanks' Comparison tool to provide a bit of insight into the two chip plays — Nvidia (NASDAQ: NVDA) and Intel (NASDAQ: INTC) —that may be most intriguing through the eyes of investors seeking a rebound. In terms of analyst forecasts, NVDA looks better. However, let's dig deeper.
Nvidia and Intel are semiconductor stocks on opposing sides of the spectrum. Though both stocks are under a lot of selling pressure, Nvidia remains one of the pricier (and more exciting) plays, while Intel seems dirt-cheap amid ongoing struggles to reclaim some of the market share it lost over the years.
Undoubtedly, Nvidia is a fallen winner still at the forefront of GPU innovation, while Intel seems to be losing ground to the competition. As the broader tech scene is dragged lower, investors may wonder if it's better to go with the hard-hit but still "pricy" leader or pay a rock-bottom price tag for an underdog with hopes that it can close the gap.
Nvidia (NVDA)Nvidia stock is down about 64% from its all-time high of around $346 per share. The Nvidia growth story is still alive and well. In fact, it may have improved over the past year as shares have sagged. Though Nvidia is leading the charge for the chipmakers, with a foot in the door of so many trends in tech (think AI and the metaverse), the valuation was suspect. It may still be suspect today, even after shedding around two-thirds of its value from peak to trough.
Now, Nvidia stock deserves a premium to the peer group. Its incredible founder and CEO, Jensen Huang, have found a way to raise the bar in the industry. As numerous technological trends continue to evolve, Nvidia's growth rate could surpass the estimates of many. Indeed, it's tough to gauge what demand will be like in five years after the recession has blown over and new trends in tech (think wider adoption of video gaming and mixed-reality headsets).
Indeed, Nvidia is a forward-thinking growth play with a long-term growth rate that's difficult to fathom. It's hard to put a number on Nvidia's 10-year growth rate when emerging tech fields could feed demand steadily over time.
At this juncture, Nvidia stock goes for 33.4x trailing earnings and 10.4x sales. That's not all too expensive for one of the most impressive secular growth companies. Though higher interest rates and demand-waning recession woes could weigh the stock down further over the medium term, I think Nvidia is one of the names worth stashing on a radar.
What is the Price Target for NVDA Stock?Wall Street remains bullish on Nvidia, with a "Moderate Buy" rating. The average NVDA stock price target of $199.83 implies 68.1% worth of upside from today's levels. Undoubtedly, Nvidia's price target has fallen quite a bit in recent months. However, I do think Wall Street is right to stand by the company amid transitory macro headwinds.
Intel (INTC)Intel is a chipmaker that's seen shares fall more than 62% from peak to trough. Undoubtedly, Intel has lost a bit of its edge in recent years. With the economy ready to pull the brakes, there's fear that Intel could face pressure from all sides. Sluggish PC demand and decaying dominance could pave the way for considerable margin compression.
Undoubtedly, supply-side challenges could evolve into an inventory glut. Though the near-term future looks bleak, Intel is confident it can close the gap with its CPU rivals. The company is spending considerable sums to create a foundation that it hopes can help it regain some of its market share.
In August, Intel co-invested in an Arizona-based manufacturing facility that should help the firm fuel its "IDM 2.0" strategy. CEO Pat Gelsinger is confident that the strategy can help Intel turn the tides back in its favor. The market is mostly skeptical, and I think they're right to be.
At 5.8x trailing earnings and 1.6x sales, Intel is a deep-value stock that could offer huge rewards if Intel can make significant strides in 2023. The huge 5.6% dividend yield makes it tempting to bet on the chip underdog.
What is the Price Target for INTC Stock?Intel shares have been slapped with a lot of downgrades lately. Overall, Wall Street is staying cautious here, with a "Hold" rating. The average INTC stock price target of $35.17 implies a rich return of 30.4% over the year ahead.
Conclusion: NVDA Seems Like a Better PickWall Street seems to think it's better to go with the frontrunner in Nvidia rather than the underdog in Intel. I'm inclined to agree. Given the pace of innovation, it's very hard to play from behind in semiconductors.
Semiconductor stocks have underperformed so far this year. For instance, shares of Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC), and Lam Research (NASDAQ:LRCX) are down about 60%, 59%, 48%, and 54%, respectively, year-to-date. Despite this significant correction, these stocks could stay under pressure due to multiple headwinds, including the slowdown in demand and the U.S. government’s new regulations for exports to China.
Recently, Lam Research delivered better-than-expected September quarter results. Its revenues of $5.07 billion came ahead of the Street’s expectations of $4.9 billion. Further, its adjusted EPS of $10.42 surpassed analysts’ estimates of $9.57.
While its top and bottom lines exceeded estimates, Lam Research expects the new U.S. export restrictions to negatively impact its financials by $2-$2.5 billion in the calendar year 2023. Earlier, Nvidia stated that it could lose $400 million in sales due to the new restrictions.
Providing his outlook on the semiconductor sector, Susquehanna analyst Christopher Rolland said, “We downgraded the Semiconductor sector in April ’21 based on a combination of high valuation multiples and “over-ordering,” and while multiples have indeed corrected, we still wait for excess inventory to work through the system (PC/Handset/Consumer working now; Industrial/Auto/Broad-based still yet to come).”
While Rolland doesn’t see a valuation risk, inventory and growing macro headwinds remain a concern.
Bottom LineWhile semiconductor stocks remain pressured, let’s see how they stack up on TipRanks’ valuable datasets. With the help of TipRanks’ Stock Comparison tool, here is a summary of how these stocks compare.
TipRanks’ data shows that Wall Street is cautiously optimistic about the prospects of AMD, NVDA, and LRCX stocks. These companies sport a Moderate Buy consensus rating on TipRanks. However, analysts remain sidelined on Intel stock, which has a Hold consensus rating.
Further, AMD, NVDA, and INTC stocks have a Neutral Smart Score on TipRanks, and their stocks are likely to perform in line with the broader market. On the contrary, Lam Research stock has an Outperform Smart Score of nine out of 10, while analysts’ average price target of $498.65 implies 51.1% upside potential.