Intel is in an all or nothing situation. It was then that Morgan Stanley faced the strong capital investment that it is going to establish with its new factories on both sides of the Atlantic. With them it seeks two purposes: the first is to revitalize the world of chips in the competition, which until now is losing, andsecondly, to ingratiate himself with the United States, after having to withdraw from the opening of a much cheaper chip factory in China, where he had to turn back.
Even the president of the United States Joe Biden made it ugly in the State of the Union address, the first of his term in the presence of the president of the company Pat Gelsinger, who also helped by federal aid plans to build a large chip factory in Ohio with a planned investment of 20,000 million dollars. With what also supposes the explicit support of the Biden administration.
But that won’t be enough as Morningstar indicates, which stands out as the former giant has been overtaken by more agile and young companies like Nvidia in the market, due to its poor market positions and unwise strategic decisions. To do this, it points out that, in the last decade, its shares have risen 75% compared to the 6439% that Nvidia’s have grown, and with falls in the three preceding years compared to the exponential revaluation of its competitors.
In its stock chart we see that the value revives with a gain in the last five accumulated sessions of 7.69%, from 6.2 are those of the month, to cut 3.6% in the quarter and already in the year, fall from the beginning and 7.2%.
And now to take one more “Western” step in this European attempt, and therefore with the support of public money again, which goes through what was announced by the European Commission. Given the external dependence on chips, especially China, the idea is that with the new community chip law it is achieved, in 2030 that 20% of world production takes place in the European Union, twice as much as right now. And the money on the table until that date is 43,000 million euros.
So the president of the European Commission welcomed Intel, which, in the next decade, will spend 80,000 million euros and the entire value chain of semiconductors. Starting with the initial 33,000 million euros that the company is going to spend. The bulk of the investment will be the semiconductor hub worth 17,000 million euros in Germany, which will be followed by 12,000 to expand its factory in Ireland and 4,500 more for the one in Italy.
As for recommendations, from TipRanks of the 28 analysts who follow the value in the market, only 8 choose to buy, 13 advocate holding and 7 more for selling the value on the stock market. Its average target price reaches 53.90 dollars per share, which gives it a potential value of 12.8%
But this strong increase in investments has a cost for the company, as pointed out by by Morgan Stanley. Your recommendation on Intel is downgraded to underweight the value from neutral. Consider that the stock will move sideways for the next two years and don’t see a clear trajectory of positive events on the stock at this point.
And he thinks that this all or nothing is an ordeal about the future of the company, with the need to succeed in recovering the core business or face, he says, a long-term drop in gross margin and cash flow. His target price is cut to $47 a share from the previous $55.
while from Bank of America, they also place their PO at 47 dollars and keep rating on Intel to underweight the stock. While from Citi the negative emphasis is placed on the 11% drop in February in the sale of laptops, which doubles the forecasts of analysts, which clearly harms Intel.
They consider that it may be due to the lack of supply and they hope that PC sales fall in the second half of the year, after 2 years in a rowthose of the pandemic, with advances a digital double in the sector. They place their target premium at $55 per share, with a neutral rating on their shares.
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