Intel’s problems run so deep that even cops are wary

(Bloomberg) — With the most sell rates in the Nasdaq 100 Stock Index, Intel Corp. fewer and fewer fans. It’s gotten so bad that even analysts brave enough to make buy recommendations are adopting a cautious tone.

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One of them, Raymond James’ Srini Pajjuri, reasoned that the chip designer’s “many problems” are unlikely to get much worse in the near future.

“We believe the bar is low enough for 2023 and expect the company to benefit from cyclical tailwinds and aggressive cost cutting,” Pajjuri wrote in a note last week, resuming coverage with an outperformance recommendation.

Another proponent, Gus Richard of Northland Securities, is sticking to his outperform rating even after saying buying the stock after January’s ugly earnings report would likely make investors “physically ill.”

The root of Intel’s woes is that it ceded its leadership position in the crucial area of ​​manufacturing technology to Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. These companies offer outsourced manufacturing to Intel’s competitors such as Advanced Micro Devices Inc., which allows competitors to better get products to market and gain market share.

Of the 45 analysts tracked by Bloomberg that cover Intel, only nine have a buy equivalent on the stock. That was after shares plummeted 45% over the past 12 months, putting the Santa Clara, Calif.-based company close to falling below $100 billion in market value for the first time in a decade.

With 11 sell ratings, Intel is in a league of its own on the Nasdaq 100, where more than 95% of recommendations are buy or hold. Tesla Inc. and Cognizant Technology Solutions Corp., the companies with the second-highest number of sales ratings on the scale, each have just six.

Rarer still is a company of Intel’s size that has more sales than buys. Only two other Nasdaq 100 members — Cognizant and Fastenal Co. — are in this position, and their market values ​​are less than a third as much.

Chief Executive Officer Pat Gelsinger is spending heavily on new equipment and products to try to reassert Intel’s dominance, a plan that will cost billions in overspending as his company’s revenue and cash flow shrink. The ramifications of that strategy became clear last month, when Intel cut its dividend by 66% to its lowest level in 16 years.

These analysts, who back the company, tell investors that they must be patient and wait for new products made with better production techniques to come to the rescue. No one is predicting a short-term upswing.

For Daniel Morgan, senior portfolio manager at Synovus Trust Co., the current dislike for Intel is reminiscent of the aftermath of the dot-com bubble of 2002, which proved to be a bottom for the stock.

“We’re not going to give up the stock,” said Morgan, whose company owns more than 400,000 Intel shares. “We’ll see if they get through this difficult period over time. Eventually you find a bottom when it’s so oversold and everyone reacts too negatively to it.”

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Nvidia Corp. is up 66% this year as the artificial intelligence frenzy drives the chipmaker’s stock higher — making it the biggest gainer among its Nasdaq 100 and S&P 500 peers. In both indexes, Warner Bros Discovery Inc. ranks second, up 61%, followed by Align Technology Inc., up 57%.

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–Assisted by Tom Contiliano and Subrat Patnaik.

(Updates stock movements at open.)

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