Table of Contents
Shares of Intel (NASDAQ: INTC) were in flux Friday in the wake of news reports that the company was considering the possibility of spinning off its manufacturing arm from its core chip design operation to rehabilitate itself and create value for shareholders.
That news came after a disastrous earnings report earlier this month, which included weak results, disappointing expectations, the elimination of the stock dividend and a restructuring plan that will cut at least 15% of its workforce.
Investors, who have been watching for signs of change at Intel, cheered the news, sending the shares up 7.6% as of 1:10 p.m. ET.
Is it time to split up Intel?
According to Bloomberg, Intel is discussing strategic options with investment bankers – options such as splitting its two main business segments or scrapping some of the planned factory expansions that have been the cornerstone of CEO Pat Gelsinger’s transformation strategy.
Intel’s board is expected to review a range of options in September.
It shouldn’t be a huge surprise that Intel is considering such big changes, as it is clearly teetering and the stock is hovering around 20-year lows.
Is Intel Stock a Buy on the News?
At this point, Friday’s gain looks more like one dead cat bounces for the shares than something that is fundamentally meaningful. Separating the manufacturing operations from the rest of the company could be a win for investors, as the foundry operations have negatively impacted overall results, but it would also undermine Gelsinger’s long-term strategy. Such a change could even require a new CEO.
While the issue is worth watching and investors should pay attention to any news coming out of next month’s board meeting, Friday’s jump appears to be a sign of investor desperation rather than a real reason to buy the stock.
Expect volatility in Intel stock to continue as the restructuring still has a long way to go.
Should You Invest $1,000 in Intel Right Now?
Before you buy shares in Intel, consider this:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $720,542!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns August 26, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: Short November 2024 $24 Calls on Intel. The Motley Fool has one disclosure policy.
Intel shares are rising. Can a separation plan save the company? was originally published by The Motley Fool