1. Intel’s Foundry Dilemma
2. Underperformance in the Stock Market
3. Financial Performance Metrics

Intel Corporation is reportedly exploring a major restructuring that could split its chip design and manufacturing operations amid growing losses and investor pressure.

Intel’s Foundry Dilemma

Intel’s foundry division, which manufactures chips for outside customers, has struggled in recent years. CEO Pat Gelsinger, who took the helm in 2021, initially viewed the foundry business as crucial to restoring Intel's standing in the chip industry. However, the company has faced fierce competition in the AI chip market from rivals like Nvidia. Despite securing nearly $20 billion in U.S. grants and loans to boost chip production, Intel's recent financial performance has been disappointing. The company reported a net loss of $1.61 billion in Q2 2024, resulting in a 26% stock price plunge – its worst single-day performance in over 50 years. In response, Intel announced plans to lay off about 15,000 employees and aims to reduce costs by $10 billion annually by 2025.

Underperformance in the Stock Market

While Intel’s stock has shown signs of life following news of the potential restructuring, the company’s long-term performance remains a concern for investors. Year-to-date, Intel shares have plummeted 56.38%, significantly underperforming the S&P 500’s 17.96% gain. The company’s five-year return of -47.39% stands in stark contrast to the broader market’s 92.38% surge over the same period.

Financial Performance Metrics

Intel’s financial metrics paint a mixed picture. With a market capitalization of $92.49 billion and a price-to-earnings ratio of 83.88, the stock appears richly valued despite its recent struggles. The company’s profit margin stands at a slim 1.77%, while its levered free cash flow is negative $10.41 billion. Analyst recommendations for Intel stock are mixed, with an average price target of $26.06.

Intel faces significant financial challenges and competition as it seeks to regain its market position. The question of splitting the business remains on the agenda, being a pivotal point for the company's future.