The whole is often said to be greater than the sum of its parts, although that might be true in many cases, the same cannot be said of Intel (NASDAQ:INTC).
At least that is the opinion of Northland analyst Gus Richard, who claims that as far as the semiconductor giant is concerned, the “parts are worth more than the whole.”
Richard’s comment comes in the wake of Intel’s Tuesday announcement, in which the company said it plans to turn its Programmable Solutions Group (PSG) into a separate unit and pursue an IPO. It also might seek out opportunities with private investors to further hasten its growth with Intel keeping hold of a majority stake.
INTC acquired the Altera FPGA business (what is now PSG) in 2015 for $16.7 billion and based on PSG’s 12-month trailing revenues of $2.9 billion, Richard values it at $17.8 billion.
It could be worth a lot more though as a separate entity, considering how other spin-offs have turned out. Intel’s acquisition of Mobileye in 2017 cost $15.3 billion, selling a 12% stake in the firm generated $1.9 billion and as of the close on Tuesday, Intel’s MBLY stake was valued at $28 billion. By Richard’s estimations Intel’s acquisition of IMS Nanofabrication cost $100 million, it sold a 30% stake, valuing it at $4.3 billion.
Elsewhere in the business, Intel has unveiled its new internal foundry model. The company is separating the manufacturing group, establishing a separate profit and loss statement for it and Richard reckons it will become the world’s second-largest foundry, generating $20 billion in revenue.
With all the above taking place, the scene is set for Intel to finally get its mojo back. “We believe it is well on its way to reclaiming process technology leadership and is in the lead in advanced packaging,” Richard said. “It is also building a geographically diversified manufacturing network. Now, Intel is preparing to split off PSG as a standalone company. We envision Intel splitting into Intel Products, PSG, MBLY, IMS, and Intel Foundry. These individual Companies are likely to be worth more than the combined entity.”
Specifically, Richard thinks it all adds up to one INTC share being worth $56, a Street-high figure representing a 55% premium vs. the current price. Richard’s rating stays at Outperform (i.e., Buy). (To watch Richard’s track record, click here)
Richard’s take is more exuberant than that of his colleagues. Based on a mix of 20 Holds, 6 Buys and 5 Sells, the stock claims a Hold consensus rating. At $36.53, the average target suggests the shares are currently going for just about the right price. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
