After losing its mojo during the last several years, Intel (NASDAQ:INTC) stock really wants to get back in the groove. That’s easier said than done, though.
As Intel seeks to establish multiple chip-fabrication factories, INTC stock should wonder how much this will cost and whether Intel can really succeed in a competitive field.
Intel devolved from the undisputed champion of US chip makers to a struggling business that allowed its rivals to steal Intel’s market share.
So, is it a good time to bet on a comeback? Don’t be too eager, as Intel faces a long, bumpy road ahead with its international foundry aspirations.
INTC Stock Analysts Brace for a Tough Quarter
Analysts on Wall Street who cover Intel aren’t super-enthusiastic at the moment. The consensus rating on INTC stock is currently “hold,” while the average analyst price target implies a flat-to-down forward performance.
In particular, Citi analyst Christopher Danely isn’t bullish on Intel’s apparent plans to develop a foundry business as a separate unit of the company. This will, Danely contends, “likely just create a bigger, more complicated problem.”
It’s “the wrong move” for Intel to double down on its foundry business, Danely said.
Intel might be spot-on when he asserts Intel ought to “consider going back to basics.” Yet, as we’ll discuss in a moment, Intel is definitely not getting back to basics and will probably make its business operations more complicated and costly.
Intel Forges Ahead With Big Foundry Ambitions
Analysts expect Intel to post negative EPS for the current quarter. If that occurs, it would mark two consecutive unprofitable quarters for Intel. Maybe, the company could swing back to an income-positive profile by aggressively reducing expenditures and “going back to basics.”
Don’t count on that happening, though. Intel plans to spend as much as $4.6 billion on a semiconductor assembly and testing facility in Poland. Moreover, the company expects to invest around $25 billion on a microchip factory in Israel.
Besides all of that, Intel is preparing to spend $33 billion on two chip-making plants in Germany. While other tech titans are slimming down and doing everything they can to drive cost savings, Intel is branching out regardless of the financial outlays.
This new cross-border venture is currently unproven and carries enormous risks. Of course, there are established foundry businesses in place already. It could take years for Intel to compete with them with any success at all. That success isn’t guaranteed, and Intel might fail to recoup its initial investments into these fabrication plants.
Expect INTC Stock to Go Nowhere Fast
Analysts aren’t convinced that Intel will turn a profit in the current quarter. Plus, Intel’s balance sheet could deteriorate quickly as the company pumps money into an unproven foundry business venture.
Ultimately, Intel’s loyal investors could face another period of stagnation and disappointment. Therefore, INTC stock gets a “D” rating as there are more confident tech-market picks to be found in 2023.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
