Intel Struggles to Regain Dominance

Many analysts that cover Intel (INTC) remain pessimistic about the company.  With 11 sell recommendations, Intel has the most sell ratings of any stock in the Nasdaq 100 Stock Index ($IUXX) (QQQ).  Also, Intel has fallen 45% in the past 12 months, putting the company on the verge of falling below $100 billion in market value for the first time in a decade. 

Intel’s woes began last year when it ceded its leadership position in the area of manufacturing technology to Taiwan Semiconductor Manufacturing Co and Samsung Electronics. Those companies provide outsourced production to Intel’s competitors, such as Advanced Micro Devices, allowing the rivals to produce better products and increase market share.

Under Intel CEO Gelsinger, the company has embarked on a plan that involves spending heavily on new plants and products to try to reassert its dominance, a plan costing billions of dollars in increased spending even as the company’s revenue and cash flow shrinks.  The consequences of that strategy forced Intel to cut its dividend last month by 66% to the lowest in 16 years.

Not many analysts are predicting a rally in Intel anytime soon.  However, Northland Securities said it is sticking to its outperform rating on Intel, even after saying that buying the stock in the wake of January’s disappointing earnings report would likely make investors “physically ill.”  Raymond James, which also has an outperform recommendation on Intel, said the company’s “many problems” are unlikely to get much worse in the near term, and “we believe that the 2023 bar is low enough and expect Intel to benefit from cyclical tailwinds and aggressive cost cuts. 

Many analysts are telling investors that they will need to be patient and wait for new products with better production techniques to rescue the stock.  Synovus Trust, which owns more than 400,000 shares of Intel, said, “we’re not going to abandon the stock.  Eventually, you find a bottom when it gets so oversold, and everyone gets too negative on it.”  Synovus also says the current bearishness toward Intel is reminiscent of the aftermath of the dot-com bubble in 2002, which proved to be the low point for the stock. 

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