Intel Stock Plunges Over 58%: Citi Maintains 'Neutral' Rating Ahead of CEO Replacement

Intel's stock has taken a nosedive, plummeting over 58% in the past year. This significant decline has raised concerns among investors, but Citi Research maintains a 'Neutral' rating on the company, citing expectations for the replacement of CEO Pat Gelsinger within a couple of months. Let's delve into the reasons behind Intel's stock decline and explore Citi's perspective on the company's future prospects.

Intel's Stock Decline: A Closer Look

Intel's stock price has been on a downward trajectory for some time now, with several factors contributing to its decline:

1. Persistent Performance Issues: Intel's 13th and 14th-generation processors have faced persistent performance issues, which have negatively impacted the company's reputation and market share. This has led to a significant gap in valuation compared to its competitors, with Intel's market capitalization standing at $85.7 billion, while Qualcomm Inc.'s (QCOM) is at $176.7 billion, Advanced Micro Devices Inc.'s (AMD) at $197.7 billion, and Nvidia Corp.'s (NVDA) at a staggering $3.43 trillion.
2. Job Cuts and Government Grants: Despite receiving $8.5 billion in grants from the U.S. government, Intel announced plans to cut 15% of its workforce, or about 15,000 jobs, in August 2024. This decision may have raised concerns about the company's financial health and long-term prospects.
3. CEO Transition: The sudden departure of CEO Pat Gelsinger and the appointment of interim co-CEOs David Zinsner and Michelle Johnston Holthaus in December 2024 may have caused uncertainty among investors.
4. Market Conditions: The broader semiconductor industry and the overall market experienced a downturn in 2024, which may have contributed to Intel's stock decline.



Citi's 'Neutral' Rating: A Balanced Perspective

Citi's 'Neutral' rating for Intel reflects the company's current challenges while also recognizing its potential for improvement. Here's how the rating is supported by the information provided:

1. Current Challenges: Citi Research highlights Intel's need to fix its product roadmap and CPU manufacturing issues, as well as establish a meaningful foothold in the AI market. These challenges are evident in Intel's recent performance, with revenue in 2023 decreasing by -14.00% compared to the previous year and earnings decreasing by -78.92%.
2. Future Potential: Despite these challenges, Citi maintains a 'Neutral' rating, indicating that they see potential for Intel to improve its situation. This is supported by Intel's plans to:
* Appoint a new CEO within a couple of months, which could bring fresh leadership and ideas to tackle the company's issues.
* Fix the product roadmap and CPU manufacturing, which are critical for Intel's competitiveness in the semiconductor industry.
* Establish a meaningful foothold in the AI market, which is a high-growth area with significant potential for Intel.
3. Streamlining Operations: Intel's plans to streamline its operations and gain market share in the CPU market in 2025 suggest a commitment to turning around its fortunes.

In conclusion, Intel's stock decline of over 58% in the past year can be attributed to several factors, including persistent performance issues, job cuts, government grants, and market conditions. Despite these challenges, Citi maintains a 'Neutral' rating on the company, citing expectations for the replacement of CEO Pat Gelsinger within a couple of months. This rating reflects a balanced perspective on Intel's current challenges and future potential, as the company works to address its issues and capitalize on new opportunities.