Intel's share price experienced an uptick on Monday.
Intel's (INTC) stock witnessed a 4.1% surge by 9:45 a.m. ET on Monday, following CNBC's report that the U.S. Commerce Department is on the verge of granting the tech giant an $8 billion subsidy to boost its semiconductor chip production. Previous reports from The Wall Street Journal hinted at this impending grant.
A bit of a letdown
However, there's a twist in the tale. The Wall Street Journal stated last week that Intel was lined up for an $8.5 billion grant for building factories, in addition to a separate $3 billion award for the manufacturing of military-grade semiconductors. CNBC, on the other hand, reveals that the amount has been scaled down to $8 billion due to uncertainties surrounding Intel's investment commitments and the company's ever-changing technology strategy and customer demands.
Intel's financial woes
Despite the reduced grant, Intel could find the funds handy. The tech giant has suffered losses totaling $16 billion over the past 12 months and has burned through $15.1 billion in negative free cash flow. To add to its woes, revenue dropped again last quarter.
Intel's survival strategy
In a bid to save money, Intel plans to offload assets and potentially let go of up to 15,000 employees.
Is it worth investing in Intel's stock?
While the $8 billion grant will provide some relief, it won't be a panacea for Intel's issues. Experts suggest that Intel might return to generally accepted accounting principles (GAAP) profitability by next year. However, they also predict that Intel will continue to bleed money, with negative free cash flow exceeding $11 billion over the subsequent three years. It's not until 2028 that analysts believe Intel will regain its financial footing and sustain its operations without relying on external support.
In the meantime, debt accumulation continues unabated ($26 billion and counting), and the possibility of share dilution looms large. Under these circumstances, it's challenging to label Intel's stock as a profitable investment.
Despite Intel's financial struggles, with losses of $16 billion over the past 12 months and negative free cash flow, the $8 billion grant could potentially help ease its financial woes in the investing world of finance and money. However, experts caution that while the grant offers some relief, Intel is expected to continue facing financial challenges, such as negative free cash flow exceeding $11 billion over the next three years.
