Every year, a few former market darlings can’t seem to catch a break. The shares get hit hard. And business slows down, leading to a massive price and valuation compression.
After a while, however, the market finds new stocks to dislike, and what’s hated can start on the path to becoming loved again. This can happen to any stock in any sector. Often, it happens to an industry leader that gets passed up by a new leader, even if they’re still a strong business.
The market is starting to show some love for Intel Corporation (INTC). The chipmaker was once the industry leader, but has long lost its way even before the latest surge in interest for AI.
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However, the company’s chip manufacturing business is starting to take off. And that could give the company a new source of revenue and demand for years to come.
Even with shares up over 35 percent this year, Intel is far from its old highs. And at 22 times earnings, it’s cheaper than many competitors in the chip sector.
Action to take: Long-term investors may like Intel as the hated-to-loved story will take years to play out. Intel also pays a 1.2 percent dividend at current prices.
For traders, the January 2024 $45 calls, last going for about $1.33, could see mid-to-high double-digit returns on a further rally for Intel through the end of the year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.