Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Intel: Will Turnaround Plan Push Its Stock Higher?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsMar 26, 2021 04:47AM ET
www.investing.com/analysis/intel-will-turnaround-plan-push-its-stock-higher-200569542
Intel: Will Turnaround Plan Push Its Stock Higher?
By Investing.com (Haris Anwar/Investing.com)   |  Mar 26, 2021 04:47AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Intel's (NASDAQ:INTC) new CEO, Pat Gelsinger, has an ambitious plan to revive growth in the world’s largest chip-maker. The strategy, which is a mix of in-house production and outsourcing, comes after years of underperformance that allowed competitors to gain market share.

While outlining his plan to analysts this week, Gelsinger said Intel will rely more on outside manufacturers to produce some of its most cutting-edge processors, starting in 2023. He also announced a $20-billion investment to build two new chip-fabrication facilities in Arizona, called Intel Foundry Services (IFS), to make chips designed by other companies.

By doing this, Intel aims to supply the world’s largest cloud-computing customers, like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), which are now designing more of their own processors and need foundries to manufacture them. This hybrid model is a winning combination, according to Gelsinger, who was named Intel’s top executive just two months ago, after his stint as CEO at VMware (NYSE:VMW).

“Intel is back. The old Intel is the new Intel,” he told analysts in a presentation. “We’re going to be leaders in the market and we’re going to satisfy the new foundry customers because the world needs more semiconductors and we’re going to step into that gap in a powerful and meaningful way.” 

For Intel investors, the past two years have been quite disappointing. While other semiconductor-makers rallied on explosive demand for new and faster chips, Intel struggled to bring its latest products to market on time due to manufacturing challenges. 

Its competitors, including Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA), design chips that are built by outsiders, including Taiwan Semiconductor Manufacturing (NYSE:TSM)—a company that Intel is trying to imitate with this new business plan.

Mixed Reactions

Intel stock rose just 16% during over the last two years, while the benchmark Philadelphia Semiconductor Index more than doubled. Will the current plan be enough to bridge that gap and make Intel stock a good long-term investment? Analysts have mixed reactions, given Intel’s earlier missteps and the highly competitive landscape. 

Intel Daily
Intel Daily

Goldman Sachs reiterated its sell rating on the stock, noting that the $20 billion to build the new factories could hurt free cash flow and create conflicts of interests with competitors. As Goldman said in a note, cited by CNBC.com:

“Even if IFS is set up to be a stand-alone business separate from core Intel, we believe many of the large fabless consumers who compete with core Intel will be hesitant to work with IFS.” 

However, the conditions on the ground are quite fertile for Intel if the company succeeds in executing its plans.

Global chip shortages and China’s massive investments to become a leader in chip manufacturing have made the industry a part of the geopolitical tussle. US President Joseph Biden signed an executive order last month requiring a 100-day review of key supply chains, including semiconductors. He also said he would seek $37 billion in funding to help the domestic chip industry boost capacity. 

With political and financial backing, demand for chips is likely to remain strong even after the pandemic as people spend more on smartphones, games and connected devices that all need chips. According to a note from investment firm Baird, which named Intel a fresh pick and reiterated its outperform rating on the stock with a target price of $85 a share:

“We are currently witnessing arguably the worst capacity constraints since the late ’90s, while the geopolitical landscape makes it increasingly risky to bet solely on TSM. Intel just has to execute in what is the most friendly environment in past decades for US-based semiconductor production.”

Bottom Line

Intel’s new turnaround plan is impressive and offers solid reasons to be optimistic about this company. But the stock’s current level doesn't offer much upside in the short run as investors adopt a wait-and-see approach. For long-term investors, it’s better to wait on the sidelines and look for a better entry point.

Intel: Will Turnaround Plan Push Its Stock Higher?
 

Related Articles

Intel: Will Turnaround Plan Push Its Stock Higher?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Connecticut Yankee
A_Jaundiced_Eye Mar 26, 2021 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Summary: your should Buy/Sell/Hold/StayAway from Intel.  Got it?
Singh Lakhwinder
Singh Lakhwinder Mar 26, 2021 1:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
i don't know about it help me
ZM Qi
ZM Qi Mar 26, 2021 8:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
dream of the dumm
楊威利
楊威利 Mar 26, 2021 7:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is funny, intc has all talk but aside from excess fab capacity utilization and selling ip as service, their roadmap has nothing new. Any catchup is not guaranteed and they are 1.5-2 years behind tsm
Mdminhaz Ahmed
Mdminhaz Ahmed Mar 26, 2021 4:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
please help me i want your guidelines for all things
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email