Intel Corporation (INTC) stock's deep sell-off shows signs of an overreaction, in my view, as the market may be overlooking the progress the chipmaker has made in its recovery. Since its June peak, the company's market capitalization has fallen by more than half. In late October, shares cratered nearly 30% in a single session after the company issued disappointing fourth-quarter guidance. The fear now is that its recovery could take much longer than expected.
Yet isn't there some market overreaction? Despite the weak guidance, Intel delivered a solid third quarter , with 78% growth in its data center segment and significant improvements in manufacturing efficiency.
Risks remain, particularly the foundry business's heavy losses, ongoing production constraints, and massive capital spending that continues to weigh on free cash flow (FCF). Still, I see a buying opportunity after the sell-off, at the current price of $52.25 . Projected 2028 adjusted earnings per share (EPS) of $2.99 valued at a five-year average forward P/E of 27x supports an $80.73 price target, implying potential upside of 55%.
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The Sell-Off Didn't Come Out of Nowhere
Intel's recent sell-off didn't happen without reason. After it released its third-quarter results on October 29 , the semiconductor giant's shares plunged a staggering 28.6% in a single trading session on October 30.
Essentially, Intel provided guidance that fell well short of expectations. While Wall Street analysts projected Q4 revenue of about $17 billion, Intel's management guided to just $15 billion to $16 billion. Meanwhile, adjusted EPS guidance of $0.25 came in well below Wall Street's expectations of $0.44.
As if that weren't bad enough, management warned of production constraints, prolonged weakness in the PC market, and difficulties generating FCF in 2026. In fact, FCF was negative $1.47 billion over the last 12 months.
A Strong Quarter, but a Cloudy Outlook
At the same time, it's worth pointing out that the problem wasn't necessarily the Q3 results themselves, which, frankly, were good and even quite strong in some respects. For example, revenue and adjusted EPS rose 21% and 126%, respectively, year-over-year. Adjusted gross margin also reached 44%, up 4.1 percentage points.
The bigger concern is the possibility that Wall Street may need to revise its 2027 and 2028 projections downward. In fact, over the last three months, 2027 revenue estimates have been trimmed by roughly 3% to $69.27 billion, implying 12% year-over-year growth. Surprisingly, though, 2028 revenue estimates have actually been revised upward by nearly 2% over the same period. Consensus now points to $83.7 billion, implying 20.9% annual growth.
Intel's Data Center Segment Tells a Different Story
To determine whether this sell-off reflects temporary problems or a permanent deterioration in the business, look at Intel's data center business.
In Q3, revenue from the Data Center and AI segment reached $7.3 billion, up 78% year-over-year. Meanwhile, Client Computing revenue reached $8.1 billion, representing a 5% year-over-year decline.
Yet the devil is in the details. The Data Center & AI segment generated $3.04 billion in operating profit in Q3, compared to just $964 million a year earlier. In other words, operating profit more than tripled. This supports a key argument that Intel appears to be moving away from relying so heavily on the traditional PC market to drive growth. Also, its server business is rapidly becoming a much more important driver of revenue and profitability.
A Better Problem to Have
What's most interesting is that this data center growth didn't come simply from selling more processors. According to Intel, average selling prices (ASPs) for server chips rose an impressive 54% in Q3, while volume grew 10%. Much of the ASP increase came from a more favorable mix of premium products, rather than just price hikes. This helps explain why the segment's operating profit grew so much faster than revenue.
There's another detail I find particularly bullish. Demand continues to outpace production capacity. Intel also reported growth among hyperscalers, enterprise customers, and new cloud providers, despite ongoing supply constraints. Management expects these constraints to persist through 2027 and into 2028. Meanwhile, it projects annual growth of more than 30% in industry-wide server CPU volumes in both 2026 and 2027.
In other words, Intel's problem in this business seems to be more about its ability to meet demand than a lack of it. That, in my view, is a much healthier problem to have.
The Foundry Bet Is Starting to Pay Off for Intel
In addition to data centers, Intel's foundry business is another key part of its turnaround strategy. The goal is to compete with TSMC (TSM) in advanced semiconductor manufacturing. Recent progress has been encouraging, too. In Q3, Intel reported that manufacturing costs for its 18A process had fallen by roughly 40% since Q1, thanks to better yields and improved production efficiency.
This is already a significant step forward, although there's still much to prove. Intel Foundry reported $6.7 billion in revenue for the quarter, but only $411 million came from external customers. Its operating loss also remained substantial at $1.85 billion, although that was down from $2.32 billion a year earlier.
This is precisely where Intel's valuation starts to make sense. Following Q3, the sell-side consensus calls for adjusted EPS of $2.99 in 2028. As a benchmark, I use Intel's own five-year average forward P/E of 27x , which I believe is reasonable if the turnaround stays on track. Applying that multiple to projected earnings gives me a price target of approximately $80.73 per share, or 55% upside from the current $52.25 over the next 12 months.
Is INTC a Buy, According to Wall Street Analysts?
Following Q3, some analysts downgraded Intel shares , adding to Wall Street's skepticism. According to TipRanks, the INTC forecast still shows an overall Hold consensus. Of the 33 analyst ratings issued over the past three months, only seven are Buy, while 25 are Hold and one is Sell. Interestingly, the average Intel price target stands at $91.62 , which, despite the skepticism, still implies a massive 75.35% upside from current levels.
Intel's Turnaround Is Still Worth Betting On
Intel's turnaround is far from a done deal, and its stock remains highly volatile. However, there's a big difference between a company struggling to find demand and one struggling to keep up with it. Stronger server sales, less dependence on PCs, improving margins, and progress in the foundry business suggest the recovery is gaining traction.
Of course, the road ahead remains bumpy, with heavy capital spending, foundry losses, and production constraints. Still, at current price levels, I see these headwinds as more related to capacity than weak demand, making the recent sell-off an attractive buying opportunity and supporting my bullish stance on INTC.
