Shares of beaten down Silicon Valley chip maker Intel (NASDAQ: INTC
) jumped as much as 13% yesterday. Even though they gave back about half those gains, it must still have been a nice day for investors. It’s been a long twelve months since the stock was at the $70 mark, its highest point since August 2000’s all time high at $75. In the meantime they’ve had to watch the stock drop as much as 40% more than once, as calamity after calamity piled up.
While most of the other big tech names from Silicon Valley were able to put March’s crash behind them and push on to fresh highs by May or June, Intel was never able to close the gap and fully undo the damage. Instead of their earnings smashing expectations thanks to the pandemic fueled uptick in demand for tech products, the company announced delays and lowered expectations.
Life In The Old Dog Yet
Their closest competitor Advanced Micro Devices (NASDAQ: AMD) managed to make the most of Intel’s difficulty and tacked on 100% to their shares in 2020. Intel finished the year down 20%, a number made all the more unpleasant by the fact that the benchmark S&P 500 index managed to put on 16% and the tech heavy Nasdaq put on close to 50%.
But for all that, there are signs of life in the 53 year old veteran who still commands a $225 billion market cap. While by any measure shares had a disappointing 2020 as a whole, they finished relatively strong and are up 25% since November. Indeed, this column has written a number of articles arguing for a long position since Q3.
The astute investor will notice that their lows of last year were around the $44 mark, a level that shares have fallen to and bounced back from more than a dozen times since 2017. It seems there’s consistently buyers to be found down there and this past year was no different. With the downside having been tested, what kind of factors are there to help drive the shares to the upside?
Well for starters, Intel is trying on a bit of the ‘new year, new me’ attitude, and announced on Wednesday that CEO Bob Swan will be stepping down to be replaced by Pat Gelsinger. Swan has been at the helm officially for less than a year, but such was his connection with last year’s underperformance that Intel shares popped 13% on the news while AMD shares dropped by 4%.
In a note to clients, both Wells Fargo and RBC were cautiously bullish on the move. The former wrote; “we think shares of Intel are positively reacting as signs of a strategic change / direction are welcomed; however, we question whether a CEO change could limit / defer the announcement of meaningful strategic operational changes”. The latter struck a similar tone when they said that while the change is a “notable” positive for Intel, there’s still a long road ahead from a “structural and technology” perspective.
Bank of America were a little more optimistic and went so far as to increase their price target on Intel shares by 16%, while BMO reiterated their Market Perform rating and that it will take some time for longer term changes to come to fruition. The increasing involvement of activist shareholder fund Third Point will do a lot to reassure any beaten down bulls that things are happening and slowly but surely Intel’s trajectory is changing for the better
There’s undoubtedly a few years worth of poor technological and strategic moves to be undone but after the past year this has to be a good move. Based on yesterday’s pop, Wall Street certainly thinks so. Investors getting involved in Intel need to be ready to play the long game, but can get involved knowing their downside is fairly well protected with that strong line of support in the low $40s.
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