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Why Intel Stock Plunged 28% in August
Shares of Intel (NASDAQ: INTC) took a dive last month primarily due to a disastrous second-quarter earnings report that included subpar results, disappointing guidance, the elimination of its dividend, and a restructuring plan that includes laying off at least 15% of its workforce.
The news undermined any hope that Intel was making progress on what was already supposed to be a turnaround. Later in the month, the company lost a key director, who dismissed the company's slow-footed approach to the chip sector and said the company was unwilling to take risks. On the last day of the month, Intel got a reprieve after Bloomberg reported that the company was looking into potential strategic options, including separating the manufacturing business from the core chip-design operation.
According to data from S&P Global Market Intelligence , the stock finished August down 28.2%. You can see its performance in the chart below.
Intel shocks investors
It's hard for a supposed blue-chip stock like Intel to deliver as much bad news as the chipmaker did in a single quarter, and the upshot of the report is that the company is floundering at a key moment in its industry with AI demand soaring.
First, the company's second-quarter results missed the mark as it continues to be hamstrung on the bottom line by losses in its foundry division, and growth remains sluggish in core business segments.
Revenue in the quarter fell 1% to $12.8 billion, and adjusted earnings per share came in just $0.02, down from $0.13 in the quarter a year ago.
Third-quarter guidance was also underwhelming, with revenue of $12.5 billion to $13.5 billion, implying a decline of 8% at the midpoint. It also forecast an adjusted loss per share of $0.03.
In addition to the weak results and guidance, the decision to eliminate its dividend turned off investors, though it makes sense for cash conservation reasons. Finally, layoffs can sometimes please Wall Street, but in this case, the news that it was cutting 15% of employees was just another sign that the business is in disarray.
Intel needs help
Later in the month, the company delayed its Intel Innovation conference and it also lost a key director. Investors seem encouraged that the company is considering a potential break-up plan or cutting back on capital expenditures, but no announcement has come from the company on that, so it seems speculative right now.
Additionally, the prospects of the stock being removed from the Dow Jones Industrial Average have significantly increased. At this point, it's going to take a lot of work to turn around the business and rehabilitate the stock, and investors could easily run out of patience again.
Before you buy stock in Intel, consider this: