Intel’s (NASDAQ:INTC) has faced struggles in recent years, with manufacturing delays and competitors’ superior products chipping away at its receding market share. Meanwhile, internal turmoil – marked by the departure of CEO Pat Gelsinger last December – has signaled a loss of direction. As a result, the stock has plunged ~43% over the past year.
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However, more recently the shares have been trimming those losses, gaining ground on account of rumors there might be a savior – or even saviors – at the gate.
The rumor mill has been in full swing with multiple reports about possible partnerships between TSMC and Intel, with the U.S. federal government also involved. Several outlets said discussions were in the early stages with reports suggesting TSMC might take a minority stake in a joint venture and transfer tech to Intel, while others indicated TSMC could acquire a majority stake in some or all of Intel’s manufacturing assets. It’s not only the manufacturing assets that are drawing attention; some reports speculated that Broadcom might be interested in Intel’s design and product assets.
That said, Morgan Stanley analyst Joseph Moore makes the point that none of those involved have commented on these reports. On the other hand, the 5-star analyst notes that TSMC stated in its 2Q24 earnings call that it was not interested in joint ventures in the U.S. and reaffirmed in the 3Q24 earnings call that it had no plans to acquire Intel’s fabs. Furthermore, a Reuters report suggested that the White House probably won’t support foreign ownership of Intel’s manufacturing facilities.
“So there is quite a bit of uncertainty here, and we would not draw any conclusions about what may happen,” Moore went on to say.
In any case, Moore says the structure of the deal would be crucial in determining whether the outcome is favorable or unfavorable.
“We believe the value here is the product business, and we would prefer whatever fab outcome puts the product business into the best position to succeed, whether that is IDM 2.0 (the Gelsinger strategy), IDM 1.0 (essentially the Bob Swan strategy, using the fabs to support the product roadmap and any premium priced nationally sensitive foundry, without trying to compete economically with TSMC) or pure fabless,” Moore opined.
Bottom line, the analyst rates Intel shares as an Equal-weight (i.e., Neutral), along with a $25 price target, suggesting the stock is currently fully valued. (To watch Moore’s track record, click here)
The Street’s average target is actually a little lower; at $22.79, the figure factors in a one-year slide of 8%. Most, like Moore, remain on the sidelines for now; based on 27 Holds, 5 Sells and just 1 Buy, the consensus view is that this stock is a Hold. (See INTC 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.
