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Why Intel Stock Keeps Falling

In Business
April 05, 2024

Shares of beleaguered semiconductor giant Intel (NASDAQ: INTC) tumbled for a fourth straight day on Friday, falling 2.3% through 10:15 a.m. ET as investors continue to digest the news that Intel lost $7 billion building semiconductor chips for its competitors last year. And Wall Street isn’t helping matters much.

Adding insult to injury, this morning, investment bank Bernstein commented that there is “no real reason to [own Intel stock] until 2030.”

Why is Bernstein bashing Intel?

Why is Bernstein pouring salt into the wounds of investors, who’ve already suffered a 13% loss on Intel stock so far this week?

Earlier this week, Intel confirmed it will separate out financial results for its semiconductor foundry business. And in preparation for this change, the company gave investors some insight into the historical performance of the foundry business.

Investors didn’t like what they saw, though: Intel’s foundry business lost nearly $7 billion last year — losses 35% worse than in 2022, with 31% worse sales — and the semiconductor cycle hasn’t even “troughed” yet. As StreetInsider.com reports, Intel thinks it can turn this business around, break even in 2027, and reach 30% “adjusted” operating profit margins by 2030 — but Bernstein thinks margins might only be 25% by then, and called Intel’s forecast “aggressive.”

Is Intel a buy in 2030?

Long story short, Bernstein is in no rush to buy Intel before its down cycle ends and its profit margins turn positive — and you shouldn’t be, either. Even after this week’s sell-off, Intel stock still sells at a very pricey 99 times trailing earnings. Worse, the company is burning more than $14 billion a year in cash, deepening the negativity of a balance sheet that already shows $24.7 billion more debt than cash on hand — and now Intel has warned that things are still getting worse!

Don’t get me wrong: Intel could still bounce back eventually. But most analysts agree the company won’t stop burning cash before 2028 at the earliest. I’d be in no rush to buy this stock until it does.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

Why Intel Stock Keeps Falling was originally published by The Motley Fool

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