Intel is getting chip wrecked.
Shares of the Dow stock slid more than 5% on Thursday following comments from CEO Bob Swan that he expects the company to grow revenue at a single-digit percentage rate for the next three years. The stock was also downgraded to market perform at BMO Capital Markets, with analyst Ambrish Srivastava writing in a note to clients that "at best, we see the shares [of Intel] treading water."
Intel is now down nearly 10% for the week — on pace for its worst week of the year — and down more than 15% in the past month. While some might say this is an opportunity to buy the dip, two experts warn that the stock's fall may not be over just yet.
"I think specifically when it comes to Intel there's really not much to like here," Strategic Wealth Partners' Mark Tepper said Thursday on CNBC's "Trading Nation." "Strike 1, they gave us weak guidance during their earnings release. Strike 2, they underwhelmed us on investor day. Their PC business is flat to declining, gross margins declining, it's going to continue to do so for the next two years. So I'm not going to wait for strike 3," he argued.
One of the reasons BMO downgraded Intel was due to increasing competition from chipmaker AMD. Tepper echoed this point, saying "AMD is coming at them full throttle" and taking market share away from Intel, and also forcing the company to slash prices in an effort to stay competitive.
"Competing on price is not something I want to be a part of. So we would prefer to invest in companies that are competing on innovation not price, so we're staying away," he said.
The SMH, an ETF that tracks the biggest names in the chip space, started the year on solid footing. For a while it even seemed that it couldn't be stopped. From January to April, the ETF surged more than 40%, ultimately hitting an all-time high on April 24. But tariff talk and trade war concerns have hit the semiconductor space hard, with the ETF falling about 8% since its April high.
The recent slide notwithstanding, the SMH is still up about 27% for the year, nearly doubling the S&P's 14% gain. Within the SMH, every single component is positive for the year — except for Intel.
From a technical standpoint, Miller Tabak's Matt Maley argues that the next few trading sessions will be instrumental in determining Intel's longer-term direction. He believes that if the stock can hold at its current level, it may turn a corner, but if it breaks to the downside there might be a further fall ahead.
"It could find some support right at these levels. I mean the stock has basically seen a mini crash," he said on "Trading Nation."
"It's down to its trend line from the middle of 2017, and if you look at its RSI [relative strength index] chart, it's getting quite oversold on a near-term basis, so I think it will bounce off that line on a very near-term basis. The problem is if it rolls back over, the next trend line from 2016 is another 10% lower."
The SMH has shed more than 6% this week and is on pace for its worst week of the year. On Thursday, the ETF fell below its 50-day moving average — a key technical indicator used to help determine the trends in a stock or ETF — which Maley believes might point to more losses ahead. He attributes the leg lower not just to China trade fears, but to general weakness in the space, noting that "earnings season as a group guided lower."
"It [the SMH] has broken its trend line since December ... so I think it's still got some more downside as we move through the rest of the second quarter, even if we get a short term bounce," he said.