Chip stock Intel (INTC) is starting to look a lot like the Underpants Gnomes of South Park fame. You remember that business plan, right? Stage one, find underpants; stage two, ?; stage three, profit. No one ever knew what stage two was, but it was the vital linchpin between finding underpants and somehow making money from doing so. That is what Intel needs right now, with its earnings report just hours away. Investors are worried that phase two may never materialize, and sent shares down over 3% in Thursday afternoon’s trading.
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There are already some outside analysts who think that Intel’s quarterly numbers do not even particularly matter right now, and not without reason. The losses are already expected, and investors have probably baked those into their stock purchases. Now, Intel is a lot more about its future than anything, and one thing that new CEO Lip-Bu Tan is going to have to do is demonstrate that Intel has that “phase two” we mentioned earlier: a clear path to profit.
Sure, bringing Lip-Bu Tan in to replace Pat Gelsinger back in March was a bold stroke. And Tan has certainly made no shortage of moves in the interim, slashing projects and staff like vines and branches in an epic jungle movie. The buildup is clear, and Tan needs to present something powerful today or run the risk of losing investors further. As KC Rajkumar with Lynx Equity Strategy noted: “The upcoming earnings event is all about a believable path to break-even profitability. But it takes more than mere cost-cutting. Revenue needs to grow as well.”
A Lawsuit Win at Least
But better yet for Intel, it managed to bring home one win in a lawsuit brought about by shareholders. Shareholders sued Intel over the $32 billion one-day plunge it saw not so long ago. The suit alleged that Intel hid substantial problems with its operations, particularly an operating loss from fiscal 2023 that amounted to $7 billion.
But San Francisco U.S. District Judge Trina Thompson ruled that Intel did not wait too long before disclosing that loss. Though Thompson “…understands plaintiffs’ frustrations…,” the law stands unviolated. In fact, Thompson noted, Intel had made it clear that foundry results would be “obscured” until 2024. This means that information Intel released previously could not have been misleading.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 23 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 24.47% loss in its share price over the past year, the average INTC price target of $22.28 per share implies 2.02% downside risk.
