If life were a fairy tale, Intel’s (NASDAQ:INTC) new CEO would take the reins and, with a wave of a wand, spark a transformation that lifts the Silicon Valley pioneer back to the pinnacle of the tech industry.
That’s the hope riding on Lip-Bu Tan. The new INTC head does have the credentials to perform impressive feats of corporate strength. He previously led Cadence Design Systems shares to a 3,200% increase during his time helming the company between 2009 to 2021.
So, is a similar turnaround in the cards for Intel? According to investor Stone Fox Capital, the script may be exciting – but the plot twist won’t arrive anytime soon.
“INTC stock is likely to struggle in the near term as the new CEO implements disruptive changes,” predicts the 5-star investor.
And the hurdles are significant. Intel is lagging badly in the AI GPU race, and its foundry business has been struggling massively. Stone Fox describes the company’s operations as such a “mess” that recent rumors suggested Intel might break itself apart just to regain focus.
Tan, however, is wasting no time. Reports suggest he’s planning on making significant changes to the company’s chip manufacturing, shifting Intel’s AI approach, and cutting INTC’s workforce. While Stone Fox notes that Intel has over 3x the amount of workers that Nvidia and AMD each employ, the investor believes that slashing the head count will not exactly entice would-be talent to join INTC’s ranks.
And even with these moves in play, a turnaround won’t be quick. According to Stone Fox, real progress will take time – meaning investors shouldn’t count on a near-term rally.
“Intel probably has another 18+ months of restructuring before the stock becomes interesting from the turnaround view,” adds the investor.
The company’s relatively low valuations are not enough to attract Stone Fox, who foresees more losses before any potential gains. Therefore, the investor believes this is one to stay away from at the present time.
“The stock likely gets worse before getting better because the new CEO isn’t a miracle worker,” concludes Stone Fox, assigning INTC shares a Sell rating. (To watch Stone Fox Capital’s track record, click here)
Wall Street has yet to make a determination regarding the new CEO. Its 27 Hold ratings vastly outnumber its 1 Buy and 4 Sell ratings, giving INTC a consensus Hold (i.e. Neutral) rating. INTC’s 12-month average price target of $23 implies a modest 5% downside in the year ahead. (See INTC stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.