We recently compiled a list of the 10 Best Undervalued Stocks to Buy According to Reddit. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against the other undervalued stocks. If interested, read our recent piece on the 10 Most Undervalued Stocks to Buy for Under $20.
Retail investors often discuss their investments on platforms such as Reddit and have become a major market force in recent years. According to a report, inflows from retail investors in the stock market between 2014 and 2019 averaged around $200 million, with a peak of $730 million in 2015. The figure spiked to $1.2 billion in 2020, with daily flows reaching $1.48 billion in 2021. Over the next couple of years, the value of inflows hovered between $1-1.4 billion per day, driven by commission-free online trading platforms and stimulus payments from the government. The surge in investor inflows is also owed to the pandemic, during which low interest rates and bond purchases by the Federal Reserve pumped heavy money into the American financial system.
The year 2024 has already been a healthy year for the American stock market, driven by a strong performance by technology stocks. Tom Lee, the co-founder and head of research at Fundstrat Global Advisors, is bullish on the ongoing fiscal year and anticipates the market to triple in size by the end of the decade.
The two major factors driving Lee’s bullish projection were the global labor shortage and a surge in the population of millennials. He mentions how millennials are the largest generation shaping the economy and are set to inherit big as we approach the generational wealth transfer of at least $80 trillion. According to a report, by 2030, millennials will have five times more wealth compared to what they have today. Moreover, the past two incidents of global labor shortage led to major spikes in technology stocks, and Lee is expecting the same again this time. However, he also warns of risks that could undermine his positive outlook, including AI backfiring, global recession, and geopolitical instability.
This uncertainty about the stock market, coupled with stocks’ volatility, makes it difficult for investors to ascertain the true value of the stock they want to invest in. American billionaire hedge fund manager, Bill Ackman, in May this year, discussed the current state of value investors and acknowledged that predicting the durability of a stock is far harder than building a financial model in the world of investment. Responding to a question about the use of AI to analyze stock investments and financial markets, Ackman stated that AI platforms might help in decision-making over the short run, but there is no guarantee that they would continue working over the long run.
Value investors purchase stocks they believe have a high value but their share prices do not reflect the stock’s actual worth, aiming to benefit when the market corrects itself. If the correct stocks are picked, it can lead to hefty returns for the investors through share price performance. One way of picking out the right stocks is noticing what the hedge funds are doing. Insider Monkey regularly covers top hedge fund stocks across industries for each quarter, and you can keep up with the information by following our website and subscribing to our newsletter. One such example is the 10 Best Aerospace and Defense Stocks to Buy Now.
Methodology
We went through several threads on Reddit to identify the most talked about top undervalued stocks according to investors on the platform. After gathering a list of companies, we went through a stock screener to verify that these stocks were undervalued. Then we sorted and listed the stocks in ascending order of how frequently they were mentioned on Reddit for being undervalued. In cases where two or more stocks were level on the metric, we outranked one over the other based on hedge fund sentiment about the stocks in question. Insider Monkey’s database of 920 hedge funds for Q1 2024 was used for that purpose.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Investors on Reddit that consider the stock undervalued: 12
Intel Corporation (NASDAQ:INTC) is an American multinational technology which manufactures computer components and related products and is one of the largest sellers of semiconductor chips in the world. Most computer manufacturers get their microprocessors from Intel. It is one of the best undervalued stocks to buy according to Reddit and trades at a paltry value. This is seconded by experts at NASDAQ, who believe the stock has a low valuation because of investors underestimating the boost the company will enjoy from its manufacturing and AI chips business during 2024-2025.
During the first quarter of 2024, the company beat analyst estimates, posting an EPS of $0.18 per share against forecasts of $0.13, driven by a strong selling of previously held inventory and operating spending discipline. CEO Patrick Gelsinger says they see the quarter as the ‘bottom’, and expect a sequence of growth over the coming quarters this year, and even in 2025. They have two main reasons for their positive outlook for the company. The first is the beginning of an enterprise refresh cycle and the second is the growing momentum for AI PCs.
The bear case against the company is the ongoing instability issues users are facing with the Intel Core i9 that is causing games to crash. This has forced several game service operators to switch to AMD. Another factor that can affect the stock’s performance is media reports about Intel considering discontinuing its plan to build a $25 billion factory in Israel. The company has neither confirmed nor denied the rumors. Another strong bearish sentiment regarding the stock is that it has not adequately upgraded its chipmaking plants over the years, because of which it conceded space to Taiwan Semiconductor Manufacturing (TSM) and AMD. The TSM has joined the race to manufacture more power-efficient and denser chips, while AMD grabbed a sizable chunk of the x86 CPU market, growing its share from 19.4% to 35.6% between 2016 and 2022, with Intel’s shrinking from 80.6% to 64.1%.
Having said that, most industry analysts are bullish about the company’s future. There is consensus among them on the stock’s Hold rating, with an average target share price of $40.09, representing an upside of 21.56%. Moreover, according to Insider Monkey, as many as 77 hedge funds were optimistic about the stock as of the first quarter of 2024.
Parnassus Value Equity Fund anticipates future growth at Intel Corporation (NASDAQ:INTC)’s and shared the following remarks about the company in its first quarter 2024 investor letter:
Intel Corporation (NASDAQ:INTC), one of the world’s largest semiconductor chipmakers, reported strong results for the fourth quarter, but its sales outlook for the first quarter fell short of expectations. While demand for the company’s central processing units may be temporarily weak, we believe the market for Intel’s personal computer and data center chips will continue to grow.
Overall INTC ranks 4th on our list of the best undervalued stocks to buy according to Reddit. You can visit 10 Best Undervalued Stocks to Buy According to Reddit to see the other undervalued stocks that are on hedge funds’ radar. While we acknowledge the potential of INTC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
