With chip stock Intel (INTC) about to declare its earnings, one of the biggest factors that is drawing investor attention is the contract manufacturing business. Some are deeply concerned that Intel may be on the horns of a dilemma, with the contract business not able to pass its rivals in quality. But investor optimism is still running high, and shares notched up modestly in Wednesday afternoon’s trading.
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Reports note that Intel will be reporting another quarterly loss on Thursday, the sixth such loss in a row. Meanwhile, revenue is also expected to drop for yet another quarter, this time, the fifth such loss in a row. Yet there are those who believe that the numbers do not even particularly matter at this point, as so much of Intel is clearly focused on the future right now.
To have any hope of rallying the investors with tomorrow’s earnings report, though, Intel will have to address the issue of the foundry side of its operations. One of the biggest issues to address is the issue of the 18A process, which Lip-Bu Tan’s predecessor Pat Gelsinger dropped billions into developing. Reports suggest Tan is considering a pivot away from 18A, and potentially massive writedowns, to focus on 14A instead. Meanwhile, Intel will likely also focus on its massive cost-cutting initiatives to keep investors interested in the future.
Speaking of Cost-Cutting….
Intel also rolled out news of job cuts coming to its Rio Rancho plant. The reports note that 227 positions will be cut from that facility, part of a larger ongoing effort to lay off as much as 20% of its total workforce.
Local leaders seem to be taking the news well; Wayne Johnson, Sandoval County Manager, noted “Obviously, we don’t want to see any cuts, but at the end of the day, Intel’s trying to work within its business model and be profitable as a corporation nationwide.” Meanwhile, Rio Rancho Regional Chamber of Commerce president and CEO Jerry Schalow noted “While any workforce reduction is unfortunate, this planned restructuring by Intel represents a minimal impact when viewed in the context of the company’s long-standing presence and ongoing investments in Rio Rancho.”
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 25 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 26.69% loss in its share price over the past year, the average INTC price target of $22.10 per share implies 5.92% downside risk.
