Intel (NASDAQ:INTC) is making moves on reports that the company is considering selling its network and edge businesses. However, many analysts believe it would take a long time for INTC to see the impact of its turnaround efforts.
Christopher Rolland, Susquehanna senior analyst, said in a recent program on CNBC that Intel Corp (NASDAQ:INTC) is “dead money” in its current strategic form.
“I do think it’s dead money in its current strategic form. I would love to see this company broken up into manufacturing on one side and product on the other. I think particularly with Trump’s pro-USA stance, manufacturing might even have a chance here. There’s also rumors out today of increased interest in their 18A foundry operation, and I would love to see large hyperscalers building out in America using Intel.”
The analyst also explained why the stock fell despite decent quarterly results. His analysis shows that Intel Corp (NASDAQ:INTC) is not seeing a broader turnaround as of yet, and it would take a long time for the investors to see some positive developments.
“The 2Q guide was light, and even though 1Q beat, there’s a couple of things here to note in the presentation. So number one, they said better volumes on PC — we think that’s PC-related pull-in because of tariffs. Secondly, they called out more competition. We think AMD is taking share here, even in the first quarter. And then lastly, data center, which also beat in 1Q — they noted that this was related to AI head nodes. What that means is, for every four GPUs that Nvidia sells, Intel sells one CPU for DGX. And so this was really where data center beat, which really isn’t a standalone Intel product.”
Intel Corp (NASDAQ:INTC) turnaround plan has many moving parts, and the stock is a hold only for those who can wait. The company is reportedly mulling a 20% reduction in workforce and a partnership with TSMC. It has already postponed its $28 billion factory project in Ohio to 2030. If the company reduces its foundry operations, it could focus on more promising areas of its business.
Tariffs and trade wars are key headwinds for Intel. China imports $10 billion worth of chips from the U.S. annually, with Intel Corp (NASDAQ:INTC) U.S.-assembled CPUs accounting for $8 billion of that total.
The EPS estimate for the fiscal year ending December 2026 stands at $0.86, giving the stock a forward price-to-earnings (PE) ratio of 23.44. For the fiscal year ending December 2027, the forward PE ratio drops to 13.50. This valuation is modest and attractive only if Intel Corp (NASDAQ:INTC) is able to successfully execute its turnaround plan.
A technician soldering components for a semiconductor board.
Invesco Growth and Income Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“Intel Corporation (NASDAQ:INTC): The chipmaker reported weaker-than-expected quarterly results as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward; the stock fell on the news. We sold the position during the quarter.
The chipmaker’s quarterly earnings report was weaker than anticipated as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward. Given that a potential recovery appears to be further in the future than we originally anticipated, we sold the position.”
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