Should I buy Intel stock after NAND business sale?

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Oct 20, 2020
  • SK Hynix to buy NAND memory chip business from Intel in a deal worth $9 billion
  • With this deal, SK Hynix will become the second largest player in the NAND memory chip market
  • Shares of Intel closed 0.78% higher yesterday at $54.58, failing to hold on to gains

Intel (NASDAQ: INTC) announced the sale of its NAND memory chip business to SK Hynix (KRX: 000660) for $9 billion. Shares of the company initially rose 3% yesterday on media reports before closing only 0.78% higher on the day.

Fundamental analysis: SK Hynix becomes the second-largest flash memory chipmaker in the world

SK Hynix will gain control of Intel’s NAND business, the company’s factory in Dalian (China), we well as design patents. With this sale, Intel’s CEO Bob Swan continues to streamline the company’s vast portfolio. 

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Intel and SK Hynix are hoping to receive the regulatory green light for the deal in late 2021, while the total agreement is expected to be completed by 2025, when SK Hynix pays the second instalment of $2 billion.

Intel will now increase its focus on core assets while it remains one of the leaders of the semiconductor industry in the United States, together with Micron. 

“Despite low margins, Intel’s Nand business is relatively attractive within the industry, as it primarily sells to coveted data-center customers,” KeyBanc Capital Markets analyst Weston Twigg said in a note

“Intel operates just one large Nand facility in China, reflecting roughly 6-7% of global Nand output.”

The South Korean giant Samsung leads the NAND memory chip market is with an estimated share of 31.4%. Kioxia is the second with 17.2%, while SK Hynix is third with 11.7%. With this sale, SK Hynix will get a market share of 23.2%.

Technical analysis: Strong resistance waiting above

Shares of Intel closed 0.78% higher yesterday at $54.58. Intel share price moved higher yesterday on initial media reports before failing to stay above the $56 mark. The 100-DMA sits at $56.65.

Intel stock daily chart (TradingView)

Twigg believes that Intel stock could benefit from improved profitability following the deal. In case the zone around $56 is cleared in the near-term, investors could push INTC towards the next target at $58 and $62. 

Summary

Shares of Intel made moderate gains after announcing the sale of its NAND memory chip business to SK Hynix for $9 billion. Intel stock price may receive a long-term benefit from this deal which may help it reach a higher valuation. 

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