Intel is feeling the brunt of losing its market-leading position to Taiwan Semiconductor and Samsung Electronics. As a result, its sentiments in the market have hit an all-time low, and the few analysts who still rate it a “buy” are maintaining a wary stance on the stock. Only nine of 45 analysts that cover the stock currently rate the stock as a buy. The stock has 11 sell ratings, the highest within the NASDAQ index.
Intel Under Pressure
The bearish tone on the stock follows a 45%+ drop over the past 12 months. The downfall started from its failure to gain ground in the chip manufacturing business amid its sluggishness in embracing new technologies. Similar companies remain industry favorites on switching their attention to producing chips for powering artificial intelligence technology.
Advanced Micro Devices is another company that continues to pressure Intel to develop better products amid the artificial intelligence revolution. The company continues to gain market share as Intel struggles. Meanwhile, Nvidia remains a bright spot of the overall industry, with a 66% gain year-to-date.
With Intel’s woes and sentiments in the market getting from bad to worse, its market cap is on the verge of slumping below the $100 billion mark for the first time in over a decade. Amid the underperformance, Srini Pajjuri of Raymond James believes the company has hit rock bottom, and things are unlikely to worsen. The analyst expects the company to benefit from cyclical tailwinds and ongoing restructuring.
Intel Restructuring
Chief Executive Officer Pat Gelsinger has embarked on a restructuring drive to reinvigorate the company’s fortunes. Part of the new drive involves investing in new plants and products expected to cost the company billions of dollars.
The company has already settled on Germany as the home for its new chipmaking complex as part of an $88 billion investment drive across Europe. It also aims to boost its manufacturing capacity in Ireland and set up a design and research facility in France.
Intel has slashed its dividend by 66% to the lowest level in 16 years as it seeks to conserve capital to pursue new growth areas. The cut came as the company saw its revenue streams come under pressure amid slowing demand for personal computers. Sales in the fourth quarter plunged 32% from the prior year, with sales in computing and data center segments going down 36% and 33%, respectively.
Intel remains the biggest supplier of chips for powering personal computers. It always pays a big price whenever there is slowing demand in the sector. In addition, the company feels the effects of higher costs of building new chipmaking facilities.
It could take some time for Intel’s fortunes and growth metrics to improve. Even though the company is working on new products with better production techniques, it is not an overnight thing. Therefore, a near-term upswing is unrealistic.
Even though Intel’s short-term outlook remains bleak, some analysts are optimistic. Senior portfolio manager at Synovus, Daniel Morgan, says they are only contemplating soon trimming their 400,000 shares in Intel. According to the analyst, eventually, the stock will hit bottom, given the strong selling pressure, and bounce back.