Once a Silicon Valley giant, Intel Corporation (INTC) is now fighting to hold its place in the semiconductor world. Years of neglecting vital manufacturing upgrades allowed rivals Advanced Micro Devices (AMD) and Nvidia (NVDA) to surge ahead in high-performance computing, a market Intel once controlled. As artificial intelligence (AI), data centers, and mobile computing took off, Intel struggled to keep pace, remaining focused on its core PC chip business while competitors diversified into high-growth areas like GPUs and AI accelerators, leaving Intel behind.
In August, Intel announced a 15% workforce cut, a stark response to shrinking revenues and significant losses in its chip foundry business. The cost-cutting measures also included a dividend suspension, raising investors’ concerns over Intel’s growth trajectory and financial stability. These moves, intended to stabilize the company, have instead highlighted Intel's struggles to adapt in a market where agility is key.
The final and very unsurprising blow came this month with news of Intel’s removal from the Dow Jones Industrial Average ($DOWI). This underscores INTC’s steep losses, as the Dow favors companies with higher share prices.
However, Intel’s latest earnings weren’t as bad as feared, sparking a surge that has investors asking: Could this be the start of a true comeback for this struggling chip giant?
About Intel Corporation Stock
Santa Clara-based Intel Corporation (INTC) is a global leader in semiconductor innovation. The company offers a broad range of products, from processors to chipsets, and is shifting focus from traditional microprocessors to data-centric solutions, targeting high-growth sectors like AI and autonomous driving.
Valued at a market cap of around $108 billion, this chip giant has been a serious underperformer amid struggles in its foundry business. INTC stock has lost almost 31% over the past year and is down by a massive 47.8% on a YTD basis, far underperforming the broader S&P 500 Index ($SPX) during both time frames.
Intel decided to suspend its dividend starting in Q4 and has not provided a timeline for when quarterly dividend payments might be reinstated. This decision is part of a larger strategy to save $10 billion by 2025, a key step in stabilizing its finances and redirecting resources for future growth.
From a valuation perspective, considering the stock’s underwhelming price action, INTC is shaping up as a bargain, especially when compared to its rival, Taiwan Semiconductor (TSM). Trading at just 2.15 times sales, Intel is priced significantly lower than TSM, which is valued at 9.58x sales.
Intel Rallies After Q3 Earnings
Intel’s Q3 earnings results, released on Oct. 31, came in mixed. Revenue dipped 6% to $13.3 billion, topping Wall Street’s $13 billion forecast. However, loss of $0.46 per share was wider than expected, weighed down by high one-time costs, including $3.1 billion in impairment charges and massive restructuring expenses.
Drilling into its segments, Intel’s Client Computing Group (CCG), responsible for PC chips, posted $7.3 billion in revenue, down 7% compared to last year, reflecting softness in the PC market. Yet the chip maker’s Data Center and AI (DCAI) segment offered a brighter outlook, achieving $3.3 billion in revenue, marking a 9% year-over-year increase.
During the quarter, Intel unveiled plans to spin off Intel Foundry as a separate subsidiary, creating a clear boundary between Intel Foundry’s external customer and supplier relationships and Intel’s core product lines. This strategic shift not only clarifies partnerships but also paves the way for Intel Foundry to explore independent funding options and fine-tune its capital structure, unlocking flexibility and potential growth for both entities.
While commenting on the Q3 performance, CEO Pat Gelsinger said, “The momentum we are building across our product portfolio to maximize the value of our x86 franchise, combined with the strong interest Intel 18A is attracting from foundry customers, reflects the impact of our actions and the opportunities ahead.”
Meanwhile, CFO David Zinsner noted that restructuring charges impacted profitability, yet these strategic moves are set to elevate future profitability and liquidity, setting the stage for Intel's optimistic Q4 outlook. For the final quarter of fiscal 2024, management is eyeing revenue to range between $13.3 billion and $14.3 billion, outpacing Wall Street’s average target of $13.7 billion.
Management is also forecasting adjusted earnings per share of $0.12, easily surpassing Wall Street’s average target of $0.08 per share for the quarter. Despite the mixed performance, the company’s better-than-expected revenue and optimistic quarterly guidance sparked investor enthusiasm, sending its shares soaring 7.8% on Nov. 1.
What Do Analysts Expect For Intel Corporation Stock?
While Intel’s Q3 results exceeded expectations, analysts remain cautious. For instance, Jefferies analyst Blayne Curtis notes that the growth is largely from the already overheated PC client segment, and warns of potential issues with Intel’s 3-nanometer and 18A process ramp-up, which could impact yields and costs. Curtis maintains a “Hold” rating with a $23 price target, advising investors to “stay on the sidelines” for now.
Morgan Stanley’s Joseph Moore echoed the cautious sentiment, noting that Intel’s stock reaction post-earnings reflects “just how low expectations have become, as the quarter was unremarkable, and the sense that they will stay the course was clear at mid-quarter." Moore also maintained an “Equal-Weight” rating, with a slightly adjusted price target of $25.58 from the previous $25.
Likewise, Evercore ISI analyst Mark Lipacis cautioned that successful execution in the foundry business would require further ecosystem development, a lengthy process. He maintained his “In-Line” rating, while raising his price target from $25 to $26.
Overall, the mood on Wall Street is still cautious for INTC stock, which has a consensus rating of “Hold.” Of the 37 analysts in coverage, one advises a “Strong Buy,” one advocates a “Moderate Buy,” 30 recommend “Hold,” one suggests a “Moderate Sell,” and the remaining four maintain a “Strong Sell.” The mean price target for INTC is $27.70, indicating expected upside potential of less than 1% from Friday’s close.
