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3 Reasons Why Intel Stock Sealed a Strong Week: Time to Buy?
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Intel Corporation (INTC - Free Report) shareholders had to bear painful losses throughout this year as the company struggled to make a breakthrough in its stumbling foundry business. However, Intel’s foundry spin-off move, a deal with Amazon.com, Inc. (AMZN - Free Report) , and a probable QUALCOMM Incorporated (QCOM - Free Report) takeover boosted its share prices last week.
Does this mean the INTC stock has room to run soon, or is it just a temporary uptick? Is it time to buy the INTC stock, or is it prudent to wait for an opportune moment? Let’s see –
Intel Stock Bounces Back
It’s been a tough year for Intel, with its shares down 57%, in sharp contrast to the Semiconductor - General industry’s gain of 93.3%. Intel has been dealing with costly technological advancements that have led to various cash concerns and compelled the company to suspend dividend payments and cut jobs.
Image Source: Zacks Investment Research
Intel’s failure to take advantage of the booming artificial intelligence (AI) revolution has also taken a toll on the stock. However, a trifecta of events helped the Intel stock to rebound last week, with the company’s shares soaring more than 11%, its best weekly performance since November.
What Led to the Rise in Intel Share Prices?
As per a Wall Street Journal report, Qualcomm has approached Intel for a probable takeover, which should bode well for both companies. Intel manufactures personal computers (PC) and server chips, whereas Qualcomm makes mobile products. So, a deal should help both companies to make the most of the other’s strengths and improve market share.
Moreover, Intel has a manufacturing hub that makes its chips. Thus, a potential deal will allow Qualcomm to have its manufacturing facility and not pay for outsourcing, eventually boosting margins.
Intel, meanwhile, has declared a new partnership with Amazon, where Amazon Web Service (AWS) will use Intel’s custom chip designs. Amazon is partnering with Intel for chip design since NVIDIA Corporation (NVDA - Free Report) has increased its pricing for the e-commerce giant.
Lastly, Intel declared it would convert its foundry business into a subsidiary. This is positive news for Intel investors since they were concerned about the company handing over chip designs to industry rivals.
The spin-off would help the struggling foundry business secure funding since this segment hasn’t performed well recently compared to Intel’s design arm. Intel’s foundry business faced stiff competition from Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , or TSMC, and reported operating losses in the first half of 2024 (read more: The Better Semiconductor Stock to Buy Now: TSM or INTC).
Nevertheless, separating the foundry business would improve Intel’s return on capital deployed. Intel also intends to spend heavily on its foundry business to lure U.S. chipmakers to rely more on domestic manufacturers than foreign companies like TSMC.
Does Intel’s Strong Week Justify a Buy Decision Today?
Intel CEO Patrick Gelsinger is banking on the tech deals and separation of the foundry business to improve the bottom line and drive share prices higher. Prominent brokers have also increased the average short-term price target of INTC by 36.1% from the stock’s last closing price of $21.14. Analysts have set the highest price target at $66, an upside of 212.2%.
Image Source: Zacks Investment Research
However, Arm Holdings plc (ARM - Free Report) has disrupted Intel’s server and networking space. At the same time, Intel has lost ground over its competitor Advanced Micro Devices, Inc. (AMD - Free Report) which has progressed in manufacturing high-performance processing machinery.
Intel’s current expensive valuation also doesn’t justify its struggles. Per the price/earnings, the INTC stock presently trades at 81.3X forward earnings. However, the industry’s forward earnings multiple is 47.7X.
Image Source: Zacks Investment Research
Hence, investors should be cautious before buying the INTC stock since it’s still a risky bet. Those invested in the INTC stock should stick to it since the company has a huge upside once it becomes the American version of TSMC, and the recent deals pay off.
Image: Bigstock
3 Reasons Why Intel Stock Sealed a Strong Week: Time to Buy?
Intel Corporation (INTC - Free Report) shareholders had to bear painful losses throughout this year as the company struggled to make a breakthrough in its stumbling foundry business. However, Intel’s foundry spin-off move, a deal with Amazon.com, Inc. (AMZN - Free Report) , and a probable QUALCOMM Incorporated (QCOM - Free Report) takeover boosted its share prices last week.
Does this mean the INTC stock has room to run soon, or is it just a temporary uptick? Is it time to buy the INTC stock, or is it prudent to wait for an opportune moment? Let’s see –
Intel Stock Bounces Back
It’s been a tough year for Intel, with its shares down 57%, in sharp contrast to the Semiconductor - General industry’s gain of 93.3%. Intel has been dealing with costly technological advancements that have led to various cash concerns and compelled the company to suspend dividend payments and cut jobs.
Image Source: Zacks Investment Research
Intel’s failure to take advantage of the booming artificial intelligence (AI) revolution has also taken a toll on the stock. However, a trifecta of events helped the Intel stock to rebound last week, with the company’s shares soaring more than 11%, its best weekly performance since November.
What Led to the Rise in Intel Share Prices?
As per a Wall Street Journal report, Qualcomm has approached Intel for a probable takeover, which should bode well for both companies. Intel manufactures personal computers (PC) and server chips, whereas Qualcomm makes mobile products. So, a deal should help both companies to make the most of the other’s strengths and improve market share.
Moreover, Intel has a manufacturing hub that makes its chips. Thus, a potential deal will allow Qualcomm to have its manufacturing facility and not pay for outsourcing, eventually boosting margins.
Intel, meanwhile, has declared a new partnership with Amazon, where Amazon Web Service (AWS) will use Intel’s custom chip designs. Amazon is partnering with Intel for chip design since NVIDIA Corporation (NVDA - Free Report) has increased its pricing for the e-commerce giant.
The Intel-Amazon deal will help the semiconductor company to regain market share from NVIDIA, which is becoming a worldwide leader in AI (read more: Post-Fed Rate Cut: Buy, Hold, or Sell NVIDIA Stock?).
Lastly, Intel declared it would convert its foundry business into a subsidiary. This is positive news for Intel investors since they were concerned about the company handing over chip designs to industry rivals.
The spin-off would help the struggling foundry business secure funding since this segment hasn’t performed well recently compared to Intel’s design arm. Intel’s foundry business faced stiff competition from Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , or TSMC, and reported operating losses in the first half of 2024 (read more: The Better Semiconductor Stock to Buy Now: TSM or INTC).
Nevertheless, separating the foundry business would improve Intel’s return on capital deployed. Intel also intends to spend heavily on its foundry business to lure U.S. chipmakers to rely more on domestic manufacturers than foreign companies like TSMC.
Does Intel’s Strong Week Justify a Buy Decision Today?
Intel CEO Patrick Gelsinger is banking on the tech deals and separation of the foundry business to improve the bottom line and drive share prices higher. Prominent brokers have also increased the average short-term price target of INTC by 36.1% from the stock’s last closing price of $21.14. Analysts have set the highest price target at $66, an upside of 212.2%.
Image Source: Zacks Investment Research
However, Arm Holdings plc (ARM - Free Report) has disrupted Intel’s server and networking space. At the same time, Intel has lost ground over its competitor Advanced Micro Devices, Inc. (AMD - Free Report) which has progressed in manufacturing high-performance processing machinery.
Intel’s current expensive valuation also doesn’t justify its struggles. Per the price/earnings, the INTC stock presently trades at 81.3X forward earnings. However, the industry’s forward earnings multiple is 47.7X.
Image Source: Zacks Investment Research
Hence, investors should be cautious before buying the INTC stock since it’s still a risky bet. Those invested in the INTC stock should stick to it since the company has a huge upside once it becomes the American version of TSMC, and the recent deals pay off.
The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.