Intel's stock price has just plummeted. Is now the time to invest?

intel (INTC -2.57%) held a big coming-out party on Tuesday, but the chip stock didn't get the reaction it expected.

The company has revised its financials to reflect that it believes the foundry is more central to its business. However, investors were disappointed with the actual numbers, and the stock price fell 8% on the news. According to Intel's restated financial report, the company's foundry division had an operating loss of $7 billion in 2023, followed by losses of $5.2 billion in 2022 and $5.1 billion in 2021. Nevertheless, management announced a bold set of goals and vision for the foundry business and the company. whole.

Intel's stock is currently trading at a four-month low, down more than 20% from its 52-week high in December. In addition to the selling after restated financial statements, the company's fourth-quarter earnings report in January also sent the stock plummeting as investors were disappointed with management's guidance.

So, is Intel a buy after the drop? Let's take a look at the company's vision for a new era.

Image source: Getty Images.

Intel in 2030

Unlike many of our semiconductor competitors and peers. Advanced Micro Devices, Nvidiaand broadcomIntel owns its own manufacturing plants, and the company views third-party manufacturing operations as follows: taiwan semiconductor manufacturing (TSM 1.22%) Samsung does too, and it's a more significant part of its business.

Intel said its pivot to a foundry operating model will drive greater efficiency and cost discipline, and said Intel Foundry will be “the world's first systems foundry in the AI ​​era.”

The company aims for an adjusted gross profit margin of 60% in 2030 and an adjusted operating profit margin of 40% by then, but Intel's gross profit margin has not reached 60% for about five years, and the operating profit margin is also low. Does not exceed 40%. Since the 1990s.

The company also just finished a fiscal year in which its operating profit was just $93 million, largely due to the slowdown in PC sales following the pandemic.

Given the company's current financial position and past performance, achieving these gains will be a difficult challenge for Intel, and simply planning will not be enough. They need to outperform their competitors and catch up with advanced manufacturing processes.

Additionally, management said Intel Foundry's losses will peak this year, but it expects the foundry business to break even by 2027. It called for the division's adjusted gross profit margin to be 40% and the division's adjusted operating margin to 30% by 2030. foundry division and aims to become the second largest foundry by 2030.

Getting to that point where foundry margins approach TSMC's margins will not be easy. TSMC owns about 90% of the third-party advanced chip manufacturing market and is unlikely to give it away without a fight. Intel fell behind TSMC by failing to adopt advanced extreme ultraviolet (EUV) technology, but is still playing catch-up.

Additionally, chip manufacturing is a technical and difficult industry, and TSMC said the opening of its Arizona chip factory will be delayed because it cannot find enough skilled workers.

This issue will not be easily resolved and will likely pose a challenge for Intel as well.

Is Intel a buy?

Investors' pessimism about Intel's 2030 target may not be an overreaction. The company currently has a steep hill to climb and operates at a competitive disadvantage to TSMC as it faces challenges such as hiring a skilled workforce and scaling up factories to meet modern demands. It seems like it is.

If Intel can show progress toward these goals, investors could push the stock higher, but given that the company is projecting even bigger losses in its foundry division this year, it may take some time. It will take a while.

Investors are better off sitting on the sidelines until Intel can demonstrate that it has truly transformed and returned to steady growth.