Stock price crashes create buying opportunities. The stock price cratered when Intel (INTC) posted quarterly results, weak guidance, a 15% staff cut, and a dividend suspension. INTC stock fell by 26% last Friday.
Investors who noticed the firm’s handling of Intel’s flagship defective i7/i9 13th and 14th generation chips would have sold the stock ahead of the earnings report. The firm did not proactively investigate and regularly communicate the issues with the chip causing high-end gaming systems to crash. The poor customer service and after-sales support will tarnish Intel’s reputation.
Loyal customers expected Intel to sell reliable products. That is now in question.
In Q2, CFO David Zinsner said that gross margin headwinds result from Intel ramping up its AI PC product. Risks are substantial if consumers do not upgrade the PC solely for the AI NPU feature. To adjust for lower demand, Intel cut 15% of its 110,000 workforce. This will lower its spending levels. It is also suspending its dividend starting in Q4.
Intel needs the liquidity to support its aggressive capital expenditure. While it cut spending by 20% for 2024 for new plants and equipment, it will still spend between $25 billion and $27 billion.
Your Takeaway
Intel shares could fall to lower levels in the months ahead, just as Boeing (BA), GE (GE), and IBM (IBM) did. The firm will need to hire more engineers, cut middle managers, and increase support staff.
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