JP Morgan weighs in on Intel shares amid takeover rumors

Intel (NASDAQ:INTC) shares jumped nearly 9% on Friday as rumors of a possible takeover reignited investor enthusiasm. Technology news site SemiAccurate sparked the frenzy, claiming to have reviewed and confirmed an email detailing an acquisition offer for the entire company.

For Intel, takeover rumors are nothing new. In September, The Wall Street Journal reported that Qualcomm had floated the idea of ​​a friendly acquisition. However, by November, the rumor mill suggested that Qualcomm’s interest had “cooled.”

Christian Crosby, an analyst at JP Morgan, believes the market should not be shocked by the continued interest in Intel. After all, the company’s shares have fallen 54% over the past year, its CEO left abruptly, and its ratings have been downgraded multiple times. On top of that, Intel is in the midst of a significant transformation as it strives to become a major player in integrated chip design and manufacturing. In recent moves, the company has sought buyers for non-core assets like Altera, announced the separation of its venture capital arm and is even working to legally separate its Foundry unit.

According to Crosby, among the likely suitors, Qualcomm remains a strong asset. The chipmaker’s prior interest underscores how Intel’s capabilities could help diversify its operations, especially as Apple’s influence as a key customer wanes. Adding Intel’s foundry expertise could strengthen Qualcomm’s competitive advantage, creating a powerhouse in the semiconductor space.

But the buzz doesn’t stop there. Enter Elon Musk, the wild card in this unfolding saga. Crosby speculates that Musk, whose companies like Tesla, SpaceX and xAI require huge quantities of semiconductors, may have a vested interest in Intel’s assets. But not everyone is on board with the idea.

“While some investors were understandably concerned about the possibility of a more aggressively financed deal, similar to the Twitter acquisition, we countered that the financial firepower behind the other entities in its portfolio is far more relevant : 1) SpaceX – recently valued at $350 billion, private; 2) Tesla with a market capitalization of $1.3 billion, net cash of $20 billion and an Investment Grade rating; and 3) xAI – recently valued at $50 billion, private. Needless to say, there would be a lot of uncertainty as to how a deal might play out, but we take comfort in the fact that adding additional leverage to Intel (which it “acts as foundry or design) has little strategic merit and we believe that doing anything with the richest individual in the country would likely involve credit enhancement,” Crosby said.

Overall, Intel’s outlook doesn’t look very favorable at the moment among Wall Street analysts. With 21 Holds, 4 Sells, and just 1 Buy, the stock has a Hold (i.e. neutral) consensus rating. However, the average price target of $24.42 indicates ~14% upside potential from the current stock price. (See INTC Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the analyst featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.