Intel (INTC) stock price will be in the spotlight on Monday as investors reflect on the rumoured offer by Qualcomm and news that Apollo Global will make a $5 billion investment in the company. The stock, which rose by over 3.3% on Friday, will likely continue rising on Monday.
Apollo Global to invest in Intel
The most recent Intel news is that Apollo Global, one of the biggest players in the private equity and credit industry is considering making a $5 billion in the company.
That investment, if it goes on, is a sign that Wall Street believes that the company is severely undervalued and that the turnaround efforts by the management are working out.
Intel and Apollo have worked together before. Earlier this year, Intel sold a stake in a joint venture to Apollo in a $11 billion deal.
The new reporting came a few days after the Wall Street Journal reported that Qualcomm had made an offer to buy Intel, in which would be the biggest deal in the tech industry.
Qualcomm has a market cap of over $188 billion while Intel is valued at over $93 billion. Because of the expected equity premium, the deal would be valued at over $110 billion.
I believe that this deal will not go ahead for three main reasons. First, regulators in the United States and other countries, including China, will resist a combination of some of the biggest players in the semiconductor industry.
Second, Intel will argue that the deal severely undervalues its business. Besides, Intel was valued at over $280 billion a few years ago. As such, the management believes that it can engineer a comeback.
Third, Qualcomm’s shareholders may resist the deal, which will likely have a significant share component.
Analysts believe that other companies may come in and express a bid to acquire Intel. One of the most mentioned names is Broadcom, which has recently finalized its buyout of Vmware.
Other potential companies would be AMD and Nvidia, but their bids would also be rejected by regulators.
Intel has been a troubled company
These developments come at a time when Intel has transformed from the biggest semiconductor company in the world into a fallen angel.
Over the years, Intel has lost some important clients, especially Apple, which is now making better chips. It has also lost market share in the CPU and GPU industries and some of its recent acquisitions have turned costly mistakes.
A good example of this is Mobileye, an Israeli company that provides technology solutions to the automotive industry. It acquired it for $15 billion a few years ago only to spin it off for a lower valuation. Today, Mobileye is valued at less than $10 billion.
Intel has also been passed by companies like Advanced Micro Devices (AMD) and NVIDIA, which are known for building some of the best CPUs and GPUs. This is a notable development since Intel had the biggest market share in these sectors in the past.
Read more: Intel stock analysis: should you bet on this turnaround?
Intel turnaround efforts
The potential investment from Apollo and the likely bid from Qualcomm is a sign that these firms see value in Intel’s turnaround efforts.
As part of its turnaround, the company has decided to make its fabrication business a subsidiary and not its core business.
Analysts believe that this is a good decision since it will allow Intel to focus on designing better chips. Besides, the most valuable chip companies are usually fabless, meaning that they don’t run manufacturing plants.
Instead, companies like AMD and NVIDIA rely on Taiwan Semiconductor to do the manufacturing for them.
Intel has also been considering selling its stakes in Mobileye and Altera. In a recent statement, the company ruled out that measure, pushing the Mobileye’s stock up by over 20%.
The other part of Intel’s turnaround is layoffs. In a recent statement, the firm said that it would fire over 15,000 workers in a bid to preserve cash.
These layoffs came after the company published weak financial results, which showed that its revenue dropped by 1% in the second quarter to $12.8 billion. This decline happened as NVIDIA’s sales surged by over 115%.
Intel also lowered its forward guidance and suspended its dividend starting in the fourth quarter of this year.
Intel stock price analysis
INTC chart by TradingView
The weekly chart shows that the INTC share price has been in a strong sell-off after peaking at $62.25 in 2021. It recently dropped below the key support level at $23.5, its lowest point in October 2022.
The stock also formed a death cross pattern as the 50-week and 200-week Exponential Moving Averages (EMA) crossed each other.
Therefore, the stock will likely have some volatility this week as investors evaluate the growing interest in the company and the turnaround. The key support and resistance levels to watch will be at $19 and $25.
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