Intel stock dropped six per cent as investors reacted to the departure of the chip maker's CEO, and Wall Street analysts seem to think the company's future remains uncertain.
The stock's most recent fall brings its year-to-date losses to 55 per cent.
Citi analysts said Gelsinger’s exit could make proposals for a split between its manufacturing process and chip-design business more possible, boosting its stock.
"We believe it is in the best interest of Intel shareholders if the company stops trying to be a merchant foundry, and we believe the chance is higher now that Gelsinger was a champion of it," the analysts said in a Monday note.
If the company can exit its foundry business, its gross margins and earnings per share could rise, boosting its stock price to $50-$60 per share, the analysts wrote. That's as much as a 165 per cent gain from current prices.
However, others warn that the company's split is unlikely and would provide only a temporary stock boost.
Bank of America analyst Vivek Arya said that separating the chipmaking and design arms would give both units "much-needed" independence, but the company's $7.9 billion CHIPS Act award requires the stock to maintain a stake between 35 and 50 per cent or more in the foundry business.
The incoming Trump administration could possibly revamp that legislation, but even if the company's business units were to separate, Arya maintained that both face tough times ahead.
"Both businesses are undergoing strategic, structural, financial, and competitive issues, with no near-term solution in sight. The mgmt change could provide a near-term boost to the stock, but we maintain Underperform and $21 PO," he wrote.
Other analysts say separating the two units within Intel would only temporarily boost stock prices.
Wedbush Securities analysts said: "It would not solve Intel's larger issues (e.g. a lagging position vs. competitors for both chip design and production), meaning any immediate bump would seem onetime in nature."
The Citi analysts also warned that Gelsinger's knowledge of semiconductors was unmatched, leaving the board with a big hole to fill as it searches for a replacement CEO.
"Now that Pat is gone, the risk increases that Intel could remain behind TSMC/AMD if the new CEO is not as well-versed in advanced semiconductor manufacturing as Pat," the analysts said, maintaining their $22 price target on the stock.
Some rumours circulating on Wall Street claim that Gelsinger “retired” because he did not want to be around for what was coming next—namely, a short-sighted move to bail Intel’s share price out at the expense of its long-term future.
It was precisely this sort of thinking that got Intel into the mess it is in now, and that Kicking Pat was trying to fix.
