Intel (INTC) stock dropped 20% in after-hours trading yesterday and another 22% at the time of writing. The downside came after the company disclosed major restructuring plans, including laying off 15% of its employees and suspending dividend payments.
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Importantly, the plans were announced during Intel’s fiscal Q2 earnings call, held yesterday. It should be mentioned that it reported weak fiscal second-quarter results, with revenues and adjusted earnings per share down 1% and 85%, respectively, compared to the previous year. Additionally, INTC’s Q3 outlook was a major disappointment as it fell short of consensus estimates.
Broader Cost-Cutting Plan
It is worth mentioning that the layoffs and dividend suspension are part of Intel’s plans to slash costs by over $10 billion by 2025.
CEO Pat Gelsinger said that most of the job cuts would be completed by the end of the year. He also added that the company will not pay dividends in the fiscal fourth quarter of 2024. Further, he revealed that the company’s capital expenditures will be reduced by more than 20% in 2024.
Turnaround Efforts
The chipmaker is undergoing a massive turnaround to regain market share lost to rivals like AMD (AMD) and Nvidia (NVDA).
Apart from its cost-cutting initiative, Intel is expanding its chip manufacturing capabilities by opening new factories across the U.S. Further, the U.S. government awarded Intel up to $8.5 billion in grants and $11 billion in loans to boost domestic chip production under the CHIPS and Science Act.
What Is the Price Target for Intel Stock?
Turning to Wall Street, analysts have a Hold consensus rating based on three Buys, 12 Holds, and one Sell assigned in the past three months. After a year-to-date decline of about 40%, the analysts’ average price target on Intel stock of $40.21 implies an upside potential of 38.42%.
