Having fallen almost 60% on a YTD basis, after a breakout 2023, the decline of Intel's stock price has been as dramatic a turnaround as we can remember in such a relative short period. 2023 saw Intel shares gain some 90% through the year as the stock price closed out a little above $50.
Fast forward a little over half a year, and Intel's stock is now a shade above $20, having bounced almost 6% in trading yesterday. With new 52 week lows set at $18.84 we are looking at a company that is back trading at levels not seen in 15 years. So what is going on at Intel, and is there another turnaround looking likely?
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The price action on the 2 year chart above, marked up on the weekly candles tells part of the story.
Intel's long trajectory towards revitalizing its manufacturing capabilities has been fraught with challenges, and recent developments have cast a shadow over its immediate prospects.
The tech giant has undertaken hefty investments to gain a technological edge over Taiwan Semiconductor Manufacturing Company (TSMC), a key competitor. Its ambition to lead with the Intel 18A fabrication process is aggressive, aiming for readiness by the year's end.
The corporation's endeavors also extend to overhauling its core businesses: personal computers and server chips. Historically hampered by delays and manufacturing oversights, these segments are poised for renewal with advanced manufacturing processes. By 2030, Intel's ambitions have set it on a path to be the world's second-largest foundry, pursuing in excess of $15 billion in revenue from external foundries annually.
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Meanwhile, headwinds persist. A sluggish PC market, fierce rivalry from the likes of AMD, and the data center shift to artificial intelligence (AI) chips present formidable challenges. Reflecting these pressures, Intel's financials fell short of second-quarter estimates. In a decisive response, the company has unveiled plans to slash at least $10 billion in costs, encompassing both operating expenses and capital outlays, by 2025. This includes a workforce reduction of approximately 15% and a poignant suspension of dividends to bolster its reserves.
The recent sale of shares held in chipmaker ARM would have raised the company a little under $150million.
Analysts targets are clearly split. The most optimistic see huge upside, whilst the bears see further losses to come. While some have lost faith in its ability to bounce back, others see its current valuation as an unwarranted pessimism given its robust plans.
The company's immediate future hinges on its ability to execute its turnaround efficiently, and only time will tell if Intel can reconcile its grand aspirations with an unforgiving market landscape.
