Reports Q1 2021 results on Thursday, April 22, after the market closes
Expected Revenue: $ 17.78 Billion
EPS expectation: $ 1.14
The rise in Intel's (NASDAQ 🙂 stock so far in 2021 is promising, after the stock went through a challenging few years. Year-to-date, the stock is up more than 25%, outperforming both the tech-heavy and the industry benchmark, the – by a big margin.
That rally accelerated in March after new Chief Executive Officer Pat Gelsinger announced a turnaround that could boost growth and maintain Intel's role as the world's largest chip maker after many missteps that negatively impacted sales. affected.
In February, Intel deposed then-chief executive Bob Swan to bring in Gelsinger, the former chief of VMware (NYSE 🙂 – who had previously spent years at Intel on the tech side of the company – to help solve the troubled semiconductor giant. lead. , which ceded the title of America's Most Valuable Semiconductor Company to NVIDIA (NASDAQ 🙂 last year.
This happened because Intel failed to produce the next generation of chips for rivals who had outsourced much of their production to Taiwan Semiconductor Manufacturing (NYSE :). These production setbacks helped competitors gain market share, while Intel shareholders were severely punished.
In the past year, when other chip makers saw their stock prices rise as they took advantage of rising demand, Intel's stock barely moved. In fact, it was down more than 3%, while NVIDIA more than doubled in value.
Despite the recent momentum in Intel stock, which closed at $ 63.70 on Wednesday, investors shouldn't expect a major earnings surprise later in the day when the California-based company releases its Q1 report. Revenue is expected to decline by 10% this fiscal year, after an increase of 8% in the previous year. They were up just 1.6% in 2019.
$ 20 Billion New Foundry Business
Amid these factors, Intel is trying to reverse its course, fueling investor optimism. Last month, Gelsinger unveiled a grand plan that included creating a new $ 20 billion foundry company that will produce chips for other companies. He also plans to use rivals' factories to outsource the production of more Intel components.
Last month, at Intel's Analyst Day, Gelsinger said:
“Intel is back. The old Intel is the new Intel. We will become market leaders and we will satisfy the new foundry customers as the world needs more semiconductors, and we will step into that gap in a powerful and meaningful way. "
Some analysts are skeptical of the Santa Clara, California-based company's new course, reminding investors that the chipmaker could not succeed in its earlier foray into the foundry industry.
"Obviously, there will be many questions about whether Intel can be successful as a foundry-given failure in the past," said Evercore ISI analyst C.J. Muse in a note last month. But, he added, Intel's new plan "suggests that this is a much more serious endeavor under current leadership."
JP Morgan analyst Harlan Sur, who repeated another buy review on Intel in January with a price target of $ 70 per share, believes Gelsinger's track record with VMware and his instrumental role as Intel's Provide Chief Technology Officer with the right background to navigate the world. company through what is arguably one of the most challenging periods of the company's existence.
Bottom Line
Intel stock is a reversal suitable for long-term investors, especially when the chip boom is expected to last for many years amid severe shortages and political urgency to build its own capabilities. But to succeed in this global race, companies will have to spend a lot of money, as with the plan Intel announced last month, and wait for the windfall in the coming years.
