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Intel Rises 4% On $10B Share Buyback Bonanza; Top Analyst Says Sell

Intel announced accelerated share repurchase agreements (ASR) to repurchase an aggregate $10 billion of its common stock, sending shares up almost 4% in Wednesday’s after-market session.

Following the completion of the ASR agreements, Intel (INTC) will have repurchased a total of about $17.6 billion in shares as part of a $20 billion share buyback program. Intel resumed the repurchase program after its suspension on March 24 in light of the COVID-19 pandemic. It was was originally announced in Oct. 2019.

The US chipmaker said it is funding the share repurchases under the ASR agreements with existing cash resources.

“We achieved record financial results in the first half of 2020 and raised our full-year outlook as customers rely on Intel technology for delivering critical services and enabling people to work, learn and stay connected. As the ongoing growth of data fuels demand for Intel products to process, move and store, we are confident in our multiyear plan to deliver leadership products,” said Intel CEO Bob Swan. “While the macro-economic environment remains uncertain, Intel shares are currently trading well below our intrinsic valuation, and we believe these repurchases are prudent at this time.”

Intel added that “strong” operating results in the first half of 2020 have contributed to a healthy liquidity balance, which gives the company the ability to invest in the business during a period of economic uncertainty while also returning capital to stockholders through dividends and these share repurchases.

Under the terms of the ASR agreements, Intel will initially receive about 166 million shares, with the final settlement scheduled for the end of 2020. The final number of shares to be repurchased by Intel will be based on the volume-weighted average stock price of the company’s common stock during the term of the agreements, less a discount and subject to adjustments.

Intel intends to complete the $2.4 billion balance of its planned $20 billion share repurchases and return to its historical capital return practices when markets stabilize.

Shares in the California-based company, which is one of the few remaining in the world that both designs and manufactures its own chips, have plunged 21% over the past month after the company said on July 23, that its 7-nm transistor would be delayed until 2022. Meanwhile, Intel last week revealed a new technology for making transistors which is said to improve the performance of its next round of processors by as much as 20%. (See Intel stock analysis on TipRanks).

Following the news, Rosenblatt analyst Hans Mosesmann reiterated his Sell rating on the stock with a $45 price target, saying that he doesn’t believe Intel’s roadmap changes the relative competitive dynamic vs. Intel’s key compute rivals: AMD, Broadcom, Marvell, Nvidia, and Xilinx.

“Overall, Intel’s strategy appears to be a more cowbell type of approach,” Mosesmann wrote in a note to investors.

The rest of the Street is sidelined on the stock. The Hold analyst consensus breaks down into 14 Holds and 9 Sells versus 8 Buys. The $57.08 average price target implies 18% upside potential in the next 12 months.

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