What to do with Intel’s stock after Friday’s plunge?

By: Jayson Derrick
Jayson Derrick
Jayson lives in Montreal with his wife and daughter, loves watching hockey, and is on a lifelong quest to… read more.
on Oct 24, 2020
  • Intel's stock fell 10% after two concerning read outs from its Q3 report.
  • One pro argues Intel has historically navigated through "rough patches."
  • Another higlights Intel's 3 problems as reason to avoid the stock.

Shares of Intel Corporation (NASDAQ: INTC) fell more than 10% on Friday after the tech giant’s third quarter report showed a 7% revenue decline in its data center business and management said its new 7-nanometer processors will be delayed by six months.

Should investors buy Intel’s stock after recent weakness or is there more downside ahead? These two pros offered both sides of the argument.

Fund manager: No reason to sell

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Jenny Harrington is the CEO of Gilman Hill Asset Management and she said on CNBC’s “Halftime Report” she not only isn’t a seller of Intel’s stock but she regrets not buying more. Intel’s stock is a victim of investors overly focused on the short-term and the upcoming “rough patch” should be taken advantage of.

From a historical perspective, Intel always rebounds from a “rough patch” and this time is no different as it will figure out a path to growth. Management displayed a willingness to re-evaluate its entire business operation, including acknowledging it lost an edge in manufacturing and it will outsource production.

Harrington said she is looking forward to three years down the road and she is “quite certain” her existing stake in Intel will generate a profit. After all, the company still generates a “ton of money” today.

Here is a helpful guide to better determine if you should buy Intel’s stock.

Analyst: Three key problems

Intel faces three notable challenges in the near-term and a bearish stance on the stock is now appropriate, Bank of America analyst Vivek Arya separately told CNBC. First, management has no concrete plan on the table to fix its manufacturing problems. Until there is a plan, its manufacturing process faces lower yields and higher costs.

The second major problem Intel faces is the competitive environment from rivals like AMD and others are intensifying, the analyst said. Other foes like Taiwan Semiconductors are now “a couple of years ahead” of Intel.

Third, despite recent momentum in the PC and data center market, Intel’s overall revenue mix towards these segments are weak and unfavorable. This contrasts with the historical norm where Intel’s exposure to the enterprise-focused segment is strong and very profitable.

These three problems will “keep a lid on the stock,” he said. In some ways, the new management team led by CEO Bob Swan who took over in early 2019 inherited these issues. Intel is proof that if a company fails to “move ahead” it will “fall behind.”

Finally, the analyst has some advice for Intel: focus on “what you do best” instead of “trying to be good at everything.”

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