If the chip market weren’t brutal enough already, the latest news from Intel (INTC) will only drive the point home harder. Recently, Intel made some solid gains after revealing it has a new addition to its C-suite that will start next Monday. The story of that new addition—and what happened to his former employer—is what really sells it. I was already bullish on Intel before, and this story does nothing to shift that perception.
Intel’s year in share prices has had its ups and downs. In particular, there was one big up, followed by a big down. Intel started the year on an upward cant, going from just under $52 to just over $61 in just under two weeks. Its peak didn’t last, though, as the company—just a week later—slipped to around $52.
That kicked off a massive upswing in which Intel not only broke $65 but made $70 look like a genuine possibility by April. Intel couldn’t make those gains stick either, as the stock dropped back to around $53 by mid-May.
The company then largely plateaued, holding around the $55 mark until late October, when another drop took the company to around $47.50 in just six days. Intel has been fighting back from that drop ever since to recover to $55, which is roughly where it started a year ago.
The latest news seems to be giving Intel some new traction. The company hired David Zinsner to serve as its new chief financial officer starting in February.
Zinsner will be replacing George Davis, who announced plans to retire back in October. Interestingly, Zinsner was CFO at Micron Technology (MU) until the move was announced. That wasn’t the only loss, though; Intel also noted that its head of client computing, Gregory Bryant, is poised to leave the company when January ends.
Musical C-Suite Chairs
It’s interesting that Micron Technology shares lost while Intel gained as a result of one shift in the CFO slot. It’s clear Intel has made a solid move in replacing its outgoing CFO. It helps that Zinsner has already held that slot previously and in pretty much the same industry.
Intel has basically just assured shareholders that very little is likely to change as a result of this move, for better or worse. When it comes to the CFO, “status quo” is seldom bad news. Innovation in accounting isn’t that welcome anyway, in many cases.
A little status quo should also give Intel a hand as the market shifts fundamentally. When the latest numbers of chip production come out, it’s a safe bet that Intel will lose its rank as the leader in chip production to Samsung Electronics. Investors seem to be responding accordingly, migrating to firms like Nvidia (NVDA). However, Intel’s move could be in place to reassure the skittish investor that the company is in solid hands.
Worse, Intel is finding trouble with politics as well. Intel recently modified a letter it sent to suppliers, pulling all references to “Xinjiang” from said letter. Chinese social media took Intel to task over said letter, which asked suppliers to avoid doing business with Xinjiang firms over allegations of human rights issues. Intel apologized, insisting that Intel sent the letter specifically to comply with laws in America.
However, INTC is still one of the leading chipmakers around, and its recent move to enhance its production capabilities only helps. Intel investigated enhancements to its Malaysian chip making operations, planning to spend $7 billion on enhancements therein.
It’s also building two new operations in Arizona, valued at around $20 billion total. Just to top it off, Intel’s dividend history is solid and has been on the rise for at least the last two years.
Wall Street’s Take
Turning to Wall Street, Intel has a Hold consensus rating. That’s based on six Buys, 12 Holds, and seven Sells assigned in the past three months. The average Intel price target of $55.52 implies 0.7% downside potential.
Analyst price targets range from a low of $40 per share to a high of $80 per share.
Concluding Views
Looking for Intel to be a growth stock is likely to be a bad idea. It’s already trading close to its average price target. Intel isn’t likely to see big moves up or down. Its current position between the highest and lowest targets helps ensure that.
No, Intel looks like it will be a solid stock for users to hold and treat as an income producer. Intel holds an excellent position in a growing industry right now, thanks to its position as a major chipmaker. It might be losing some ground to Samsung in the short term, but there are expansion projects in the works that may address this.
Intel hiring an experienced CFO directly away from the competition helps as well; it demonstrates a push for stability. Thanks to its solid position and excellent potential as an income stock, I’m bullish on Intel.
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