The installation of new CEO Lip-Bu Tan at chip stock Intel (INTC) was supposed to be a turning point. But as it turns out, it is leaving behind a new wake of uncertainty that is prompting concern. Apparently, Tan has a wide range of investments, many of which are in China…and some of which are even connected to the Chinese military. This was bad news as far as investors were concerned, and Intel shares plummeted over 7.5% in Thursday afternoon’s trading.
Given that Tan put up $25 million of his own money to invest in Intel when he took the CEO slot, it should come as little surprise that he had substantial investments to begin with. Tan’s investments, reports noted, included “hundreds of Chinese tech firms.” Again, not surprising. The biggest surprise, though, was that at least eight of these firms had direct ties to the People’s Liberation Army, the Chinese military.
A review from Reuters found that Tan actually controls over 40 Chinese companies outright. He has minority stakes in more than 600 beyond that as well. And this, investors believe, may “complicate” the notion of getting Intel back up and running. Andrew King with Bastille Ventures noted “The simple fact is that Mr. Tan is unqualified to serve as the head of any company competing against China, let alone one with actual intelligence and national security ramifications like Intel and its tremendous legacy connections to all areas of America’s intelligence and the defense ecosystem.”
“Generational Buying Opportunity” Ahead?
But not everyone is so discouraged. Though Intel’s decline—roughly 11.38% about six months after Tan’s appointment is almost precisely a mirror for the overall drop in the S&P 500 at 11.57%—has shaken some up, others cannot help but note what we did just days ago: Intel is trading near all-time lows, and thus has a great opportunity to come back.
And come back it might. It just named UDT its “Partner of the Year for Education,” which recognizes UDT’s moves to bring technology to the educational market. UDT focuses on technology in the K-12 market, including complete “learning solutions” for one-on-one student interaction and device management functions. This represents a potentially major market, and Intel’s connection herein will likely prove one of the most resilient revenue streams it has.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 27 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 46.62% loss in its share price over the past year, the average INTC price target of $23.12 per share implies 16.18% upside potential.
