Intel Stock Price in 5 Years: Will Job Cuts, Stalled Turnaround Plan Come Good for INTC Shares?
Intel is cutting costs and restructuring to regain market share, but can it overcome challenges and recapture its former glory? l Credit: Justin Sullivan/Getty Images
Key Takeaways
- Intel stock price plummeted 26% on disappointing earnings, marking its worst day since 1974.
- Once the undisputed leader in chipmaking, Intel struggles to compete with TSMC, Nvidia, and AMD.
- Despite facing challenges, Intel’s undervalued stock and strategic investments offer hope for a future recovery within five years.
After a disappointing earnings report and a bleak forecast for the future, Intel stock plummeted by a staggering 26%— its worst day since 1974. This plunge raises serious questions about Intel’s ability to compete in the ever-evolving semiconductor industry.
The company has announced drastic measures, including significant workforce reductions and a suspended dividend, to save costs and restructure its business. Can these efforts be enough to help the chip giant reclaim its past dominance, or is this the beginning of a steeper decline?
Intel Plunged On Disappointing Earnings
Intel (INTC) shares plummeted by 26% on Friday, Aug. 2, 2024, marking their worst day since 1974. The chipmaker suspended its dividend and announced significant workforce reductions to fund an expensive turnaround.
This move comes as Intel struggles to regain its once-dominant global position in the semiconductor industry. As of Monday, Aug.5, 2024, the stock had dipped by another 6.6%.
The company’s market value dropped by over $30 billion following a disappointing forecast and news of a 15% workforce cut, exacerbating concerns about its ability to compete with Taiwan’s TSMC (2330.TW) and other chipmakers.
It aims to add $40 billion in cash to its balance sheet by the end of 2025 through these measures, along with subsidies and partner contributions.
Once the world’s leading chipmaker, Intel’s “Intel Inside” logo was a hallmark of personal computers in the 1980s and 1990s. As part of the dot-com era’s “Four Horsemen,” alongside Cisco Systems (CSCO), Microsoft (MSFT), and Dell (DELL), Intel’s market value peaked at nearly $500 billion in 2000 before declining and never fully recovering.
While Intel continued to dominate in powerful PC chips, it was blindsided by the rise of Apple’s (AAPL) iPhone in 2007 and other mobile devices that required lower-power, more affordable processors.
Now valued at approximately $91 billion, Intel’s worth is less than 5% of Nvidia‘s and about 40% of Advanced Micro Devices (AMD), two companies it overshadowed for decades until recently.
Announced Plan To Cut Jobs
Intel has announced it will cut 15% of its workforce – approximately 15,000 jobs – to restructure its business and better compete with rivals like Nvidia and AMD.
In a memo to employees, CEO Pat Gelsinger outlined plans to save $10 billion by 2025. “We must align our cost structure with our new operating model and fundamentally change the way we operate,” Gelsinger wrote.
He emphasized that revenue growth has fallen short of expectations and that the company has yet to capitalize on emerging trends like AI. “Our costs are too high, and our margins are too low.”
The job cuts follow a disappointing quarter and forecast for the company. This week, Gelsinger stated that Intel will announce an “enhanced retirement offering” for eligible employees and a program for voluntary departures.
“These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career,” Gelsinger said. Most of the layoffs are expected to be completed this year.
Additionally, the company will suspend its stock dividend as part of a broader cost-cutting strategy.
What’s Intel Working On?
“Intel is leading the charge in developing new semiconductor technologies, products, and solutions. It is positioning itself as a cornerstone for an increasingly smart and connected world across diverse markets,” the company states on its website. But what exactly is the company working on?
Intel is significantly expanding its manufacturing capacity with a series of substantial investments. These include approximately $20 billion for fabs in Arizona and New Mexico, over $20 billion for a fab in Ohio, and the acquisition of Tower Semiconductor.
It also plans to invest up to 80 billion euros in the European Union over the next decade. This enhances the entire semiconductor value chain.
Despite these ambitious initiatives, industry analysts highlight that Intel may have missed out on capitalizing on the burgeoning demand for computing power driven by AI, a gap that has allowed competitors like Nvidia to gain a competitive edge.
Moreover, the company has slowly adapted to the evolving semiconductor industry landscape. Here, different stages of production—such as design, manufacturing, and packaging—have become more specialized and are often managed by separate entities.
Intel Stock In Five Years
If all goes according to plan , Intel’s foundry will generate profits within five years, and its product divisions will have recaptured some lost market share. Should the foundry business encounter difficulties, Intel’s product units can still rely on TSMC to mitigate potential product disruptions due to manufacturing issues.
Currently valued at just $136 billion, its depressed bottom line suggests an overly pessimistic outlook relative to its potential.
Consider this: Intel’s price-to-book (P/B) ratio has fallen below 1.3, whereas foundry leader TSMC boasts a P/B ratio over 8. This indicates that Intel stock is about as undervalued as ever.
Intel’s strategic investments in manufacturing will take time to yield results. However, the long-term prospects suggest that Intel stock could be trading at much higher levels in five years.
According to technical analysis, if Intel maintains its current 10-year average growth rate, its stock could reach $36.97 by 2030. This projection implies an 85.06% increase from its current price.
Intel Cuts 15,000 Jobs, Blames AI, as Rival Nvidia Faces DOJ Probes
