Intel's October Crash: Worst Month Since 1980, But Is It a Buy?

Intel (INTC) stock closed October at $65.76, down 45% from its September close of $120.23. According to Yahoo Finance data going back to 1980, that was the worst monthly performance on record for the chipmaker. Most of the damage came on October 30, when shares fell 29% the day after third-quarter earnings. Management guided fourth-quarter adjusted earnings to just $0.25 per share, less than half the $0.52 just reported.

Despite the plunge, Intel stock is still up about 78% year-to-date through October 30. However, it's now roughly 53% below its June 22 high of $140.94. The sell-off was triggered by weak PC demand and a gloomy outlook, with CFO David Zinsner saying the PC slowdown will continue at least through the first half of next year.

History offers a mixed picture. Of the five other worst months for Intel since 1980, three saw the stock down 12 months later. The outcomes depended more on the direction of Intel's profits than on the magnitude of the drop. For example, after the September 2000 and June 2002 declines, profits continued to fall in 2000 but rebounded in 2003, leading to different stock performances.

The October 1987 crash was an anomaly: the stock fell 32.5% with the broader market, but Intel's business was booming, and shares were up 19% six months later. More recently, the April 2024 drop was followed by further losses as Intel headed for a massive net loss, while the August 2024 decline preceded a profit rebound and a 10% gain a year later.

Today, Intel's data center and AI segment grew revenue 78% year over year, and total revenue is expected to rise 13% in Q4. But profits are heading down, and the stock still trades at about 36 times 2027 earnings estimates, which could be rich if PC sales keep sliding.

The key takeaway from history is that Intel's stock tends to recover only when its profits are about to rebound. In the cases where shares were higher a year later (June 2002 and August 2024), earnings were at or near an inflection point. In contrast, after September 2000, profits continued to decline for several quarters, and the stock kept falling.

Today, Intel's profits are expected to decline further, with management guiding Q4 EPS to $0.25, down from $0.52 in Q3. The PC slowdown is projected to persist through at least the first half of next year, which could pressure earnings for several more quarters. That makes a quick recovery less likely.

Additionally, the stock's valuation remains elevated. Even after the 45% drop, Intel trades at around 36 times 2027 earnings estimates. If PC sales continue to weaken, those estimates could be revised lower, making the stock look even more expensive. The run-up before October (shares more than tripled in the 12 months prior) also resembles the 1987 and 2000 periods, which were followed by prolonged declines.

While Intel's data center and AI growth is a bright spot, it may not be enough to offset the PC weakness in the near term. Investors should watch for signs of a bottom in PC sales and a stabilization in earnings before considering a buy.