Why Intel Plunged ~10% Last Week

Before Intel (NASDAQ:INTC) reported quarterly earnings, the Chief Executive Officer replacement sent shares to over $62.00. That rally ended quickly after Intel said it would keep its chip production in-house. Instead of listening to activist advice, Intel will continue doing business the old way.

The lack of changes at Intel should infuriate shareholders. Though the token 5% increase in the quarterly dividend is welcome, Intel needs a shake-up. It enjoyed a fifth consecutive record year in revenue but AMD (NASDAQ:AMD) is catching up too fast.

Intel is diversified outside of the PC market through its Mobileye unit. CCG, DCG, and NSG are also running at record full-year revenue. For now, the Ice Lake Server shipment could buy the chip giant some time. The 11th-generation desktop chip – Rocket Lake – should keep customers somewhat content, too.

Worries continue to mount for Intel because it relied on last-generation manufacturing. Alder lake is Intel’s 10nm CPU for the desktop, only it is still in the sampling phase with customers.

Shareholders Rewarded

Intel posted a strong free cash flow of $21.1 billion in 2020. This is likely due to the pandemic driving home PC and work system sales higher. That catalyst is temporary. The dividend hike and overall return of $19.8 billion to shareholders in 2020 are good rewards.

Consider paring Intel shares at these levels and buying them if they fall by another 10%.