Home Pay off Only time will tell if recent plans pay off for INTC stocks

Only time will tell if recent plans pay off for INTC stocks


The enthusiasm of investors and Intelligence (NASDAQ:INTC) stock were used in the same sentence. But that could change everything. Assuming, of course, that the chipmaker’s changes to their game plan pay off in the years to come.

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As you may have heard, the company plans to invest heavily in the development of its chip foundry business. In addition, it takes steps that could increase its ability to prevent Advanced micro-systems (NASDAQ:AMD) to capture a larger share of the processor market. An upcoming line of GPUs could help it compete better with its main rival in this area, Nvidia (NASDAQ:NVDA).

The company’s activities in the autonomous vehicle, or AV, world is something else that may again get investors excited about its actions. Regarded as a dinosaur in recent years, Intel may start to generate higher returns in the future.

Admittedly, this remains a “show me” situation. It can take years for the stock to shed its value trap status. Not only that, there is the risk that the company’s plans will fall short.

So what’s the best decision today, even if there’s more to be excited about here than Intel’s low valuation? Don’t rush on it. In the short term, INTC stock could get stuck at current levels (around $ 53 per share).

INTC stock and chipmaker turnaround

Since taking office as CEO in February, Pat Gelsinger has implemented major projects at Intel. First, the chipmaker’s ambitious plans to become one of the leading chip foundries. In the United States, Intel is investing $ 20 billion in two new plants in Arizona and is working with the Department of Defense to relocate domestic chip production. In Europe, it plans to invest nearly $ 100 billion in new facilities. Mainly, to take advantage of the growing demand for automotive semiconductors.

Second, the measures taken by the company to keep competition at bay. Its next line of Alder Lake processors could give it greater ability to fight AMD. Its line of Arc graphics cards could threaten Nvidia’s primary share in GPUs.

Third, through its Mobileye unit, Intel partners with a German company Sixt SE to launch a robotaxi service in the domestic market of this company. This is in addition to other measures taken in terms of self-driving cars. You may recall that Mobileye is teaming up with an electric vehicle maker Nio (NYSE:NIO) on the development of robotaxi in China.

If it succeeds with any or all of these initiatives, Intel could finally return to growth mode. This could pave the way for INTC stock to break out of the $ 50- $ 70 per share range it has been stuck in since 2018. It holds great promise, but it will take time for this promise to translate into results.

Why Intel could continue to disappoint

The chipmaker may have big plans in the works, but it won’t go from dinosaur to dynamo in a few quarters. Or even years, for that matter. Like a In search of the alpha commentator wrote earlier this month, it may not be until 2024 or 2025 that his results improve dramatically.

In other words, the INTC stock could stay stuck in neutral for longer than you think. Again, this assumes that his aforementioned game plan is going as Gelsinger wishes. The global chip shortage is playing a big role in the company’s latest foundry projects.

But what happens after Intel, with foundry names like Semiconductor manufacturing in Taiwan (NYSE:TSM), capacity building? Current actions to address the chip shortage could pave the way for another chip glut, as has happened in previous cycles. When it comes to competing with AMD and Nvidia, it might be too little too late. It’s also unclear when, or even if, Mobileye will start generating the level of revenue / profit needed to make the $ 15.3 billion purchase of the company in 2017 appear to be money well spent with the recoil.

Taken together, the uncertainty of its ambitious plans and the long lead time of those plans does not count for an immediate leap for Intel shares.

The bottom line

With its recent developments, there is more to Intel than its fair market value (11.5 times projected earnings next year) to love. If the plans discussed above come to fruition, stocks could offer much better returns over the next few years than they have recently. Having said that, don’t think that you need to dive into it right now, to avoid “missing out” on what is to follow.

Many years before it takes off again (assuming its current moves are successful), there is still plenty of time to lock in a position in INTC stocks.

At the date of publication, Thomas Niel did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Thomas Niel, contributor for InvestorPlace.com, has been writing unique stock analysis for web publications since 2016.

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