I've Got Some Good Intel ...
Let's see whether to -- and how to -- play this chip giant amid an executive shakeup.
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When you read that headline, you just knew that I came in long Intel INTC. Why was I long Intel, despite its awful performance over recent years? Well, the answer is two-fold, or was it three-fold?
One, I was intrigued by the idea of distancing the core business from the foundry. That business has not really been aiding INTC's broad performance since its inception. Second, the company had hit such a low that I felt that it had to start improving. Did I think that perhaps CEO Pat Gelsinger would get fired and that would end up being an upside catalyst?
The answer is yes, I did wonder just how long the board would keep Gelsinger on the job. Now, to be clear, those were my feelings. Though we may or may not feel that Gelsinger was pushed out, we do not know that. He has, according to the press release, retired.
Indeed ... on Monday morning at 08:30 ET, Intel published a press release stating that CEO Pat Gelsinger had retired from the company effective Sunday, Dec. 1. Hmm ...usually when a high-level executive retires from a high-profile company, he or she doesn't do so, effective the day before the press release. That kind of smells like the board had enough of the current leadership and pulled some levers.
Speaking of levers, the company named David Zinser and Michelle Johnston Holthaus as co-interim CEOs, while a search for a permanent replacement for Gelsinger is conducted. Zinser is currently the firm's CFO and Holthaus is now CEO of the new company segment known as Intel Products, which included Client Computing, the Data Center, and the AI Group. Frank Yeary, who has been independent chairman of the board will now become interim executive chair while the executive search goes on.
Yeary's take in the release:
“While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence. As a board, we know first and foremost that we must put our product group at the center of all we do. Our customers demand this from us, and we will deliver for them."
Yeary added:
"With MJ’s (Holthaus) permanent elevation to CEO of Intel Products along with her interim co-CEO role of Intel, we are ensuring the product group will have the resources needed to deliver for our customers. Ultimately, returning to process leadership is central to product leadership, and we will remain focused on that mission while driving greater efficiency and improved profitability.”
Earnings
Intel is expected to report fourth-quarter performance on Jan. 23. Wall Street is looking for an adjusted earnings per share of $0.12, an unadjusted loss per share of $0.22 and revenue of $13.83 billion. These numbers would compare poorly to the year-ago comps of $0.54, $0.64 and $15.4 billion respectively. It may just be speculation on my part, but I would expect that perhaps Intel might have some trouble reaching these lower numbers given the timing of this move.
The Chart
Not much has changed technically since the last time we discussed Intel a couple of months ago. Relative Strength is roughly neutral, while the daily MACD tells a slightly bearish story. But we do have a double-bottom reversal stretching from August through October with a $22.50 pivot. The shares sort of broke out from here, and then based. The set-up is still valid.
Readers will see an unfilled gap from very early August that would require $28.90 to fill. Should the stock be drawn higher, the 200-day simple moving average stands at $29.90 and the half-way back point of the December 2023 to August 2024 sell-off stands at $34.90. I think this change, coupled with a good song and dance routine (even if the numbers stink) on Jan. 23 could set up a run at one or more of those levels.
Intel Play
Target Price: $30
Note: A take and hold of the 200-day simple moving average sets up a secondary target of $35.
Pivot: $22.50
Add: down 50-day SMA (currently $23.40)
Panic: Broken set-up
At the time of publication, Guilfoyle was long INTC equity.
