Intel Corporation (NASDAQ: INTC) is one of the greatest American technology growth stories in history. The problem is that you would never know that if you just tuned into the story in recent years. Now the company has announced that CEO Pat Gelsinger is retiring effective immediately.
The manner in which the CEO “retirement” was released may leave more questions and concerns than answers. It’s a scenario where strategic investors are likely to scratch their heads and feel very little confidence that Intel’s turnaround is really anywhere close to turning around. The rest of the conclusions will have to come from investors themselves.
Gelsinger has run Intel as CEO for nearly four years and the stock is down about 60% over that time. Rivals like NVIDIA and AMD have surged from graphics to AI, and now Qualcomm even wants to cram its way into the personal computer market with its processors. And what about those old rumors? It seems that every one of Intel’s great efforts have yet to come with rewards for its shareholders.
A REAL “RETIREMENT” OR SOMETHING ELSE?
When Intel announced that Gelsinger was stepping down, with an effective date of December 1, this left no successor in place. That cannot be a great sign that the quarter and the view into 2025 looked all that bright. And with a co-CEO structure until a successor is found can come with all sorts of continued execution risks.
Gelsinger probably wasn’t too impressed that the stock rallied 5% to 6% immediately upon the news of his exit. It’s certainly not meant as flattery. Sure, the company noted a distinguished 40-plus-year career. Yes, the company thanked him for many years of service and dedication to Intel. And they even noted “working tirelessly to drive innovation throughout the company.”
The flip-side of this exit is that Intel openly admitted that there is much more work to do at the company. They also noted that they are committed to restoring investor confidence.
After losing its leadership as chip manufacturing dominance to Taiwan Semiconductor Manufacturing a few years ago, the company’s efforts in third party manufacturing have so far shown to keep producing losses for the company. And it remains to be soon how much Intel can do with up to $7.9 billion in the government’s Chips Act funding will help the company. Intel has also signaled layoffs of up to 15,000 workers earlier in 2024.
When companies announce retirements with the date the day before the announcement, it actually creates more uncertainty than “clearing the deck.” Intel has gone through less-than-simple leadership transitions before Gelsinger took over as CEO. Now this move seemingly leaves more questions than answers.
THE REACTION
Intel shares had closed at $24.05 last Friday, and the 52-week range of $18.51 to $51.28 should spell out how troubled this situation is. Intel was last seen trading up 4% at $25.05 but the stock was up over 6% at $25.48 at the peak of trading on Monday. Intel has very few mega-bulls in the analyst community.
Analyst report usually take a day to compile and be approved by compliance departments. The initial reports of the analyst calls are not very flattering. The Finviz consensus analyst target price is $24.71 — and the bulk of the major analyst actions in the second half of 2024 has been analyst downgrades and lower price targets.
DISCLAIMER
Oggonomics has no formal rating and does not have any formal price targets for Intel or the other companies mentioned in this report. This is not intended to be interpreted as investment advice nor is this in any way a recommendation to buy or sell Intel or the other companies mentioned.
That said — could “Scratching Your Head Until It Hurts” be counted as a rating?
