‘Don’t Count on a Takeover,’ Says Top Analyst About Intel Stock

Intel (NASDAQ:INTC) may be a struggling giant in the chip industry, but several firms are stepping up to help it regain its footing.

The latest buzz comes from Apollo Global Management, a private equity firm that has reportedly offered to invest up to $5 billion in the company, with Intel mulling over the proposition. Meanwhile, Qualcomm has also been rumored to be exploring a potential acquisition of its semiconductor rival.

While those reports appear to suggest Intel could really be up for sale, Benchmark’s Cody Acree, an analyst ranked in the top 2% of Wall Street stock pros, thinks Qualcomm acquiring Intel is not really a viable play.

“We believe Qualcomm’s ultimate acquisition of Intel is logically unlikely, although we believe we understand Qualcomm’s attraction to the possibility of a combination of at least a portion of Intel, namely its chip design business, with its focus on the PC/notebook and server markets,” the 5-star analyst explained.

Since Qualcomm lacks experience in managing advanced semiconductor manufacturing plants, Acree anticipates that any acquisition would be quickly followed by the sale of Intel’s entire manufacturing division. This is a step that many have suggested Intel should take independently, and to the company’s credit, says the analyst, Intel has been working to speed up the separation of its two business units.

An Intel acquisition would “undoubtedly entail a hefty price tag,” with Acree thinking it would involve a premium of 40%-50% vs. the current share price, thereby valuing the company at $30-$32 per share, or a market cap of $125-$135 billion. Qualcomm, with a market cap of $188 billion and $13 billion in cash, would likely need to finance the deal with both debt and stock, although Acree thinks it will have no trouble securing financing in the current market environment.

That said, it is the “high degree of regulatory scrutiny the transaction would attract” that is more of an issue. Moreover, Acree thinks Intel’s design problems, which have led to a steady loss of market share to AMD in both PCs and servers, along with its inadequate AI strategy, are challenges that Qualcomm is unlikely to be able to resolve in the near to mid-term. “Ultimately,” Acree goes on to say, “we’re not convinced that Qualcomm will make a firm bid for Intel.”

To this end, Acree rates Intel shares a Hold (i.e., Neutral), without having a fixed price target in mind. (To watch Acree’s track record, click here)

Most other analysts are also staying on the fence for now. Out of 34 analysts covering the stock, Intel has received 26 Holds, 7 Sells, and just 1 Buy, giving it a consensus Hold rating. The average price target of $25.47 suggests an 11.5% upside from current levels. (See Intel stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.