Intel (INTC) stock is pushing higher on April 1 after the semiconductor firm said it’s repurchasing Apollo Global Management’s 49% stake in the Fab 34 joint venture in Ireland for $14.2 billion. The announcement signals a meaningful shift in INTC’s capital allocation strategy as it regains full control of its leading-edge European manufacturing hub.
Intel stock nonetheless has yet to reclaim its year-to-date high of about $54 in late January.
Why Is Fab 34 News Bullish for Intel Stock?
Intel’s decision to buy back its stake in Feb 34 is bullish, given that it may improve the firm’s long-term financial health and its operational autonomy.
According to INTC management, this transaction will be accretive to earnings per share (EPS) and significantly boost the company’s credit profile by 2027.
More importantly, owning 100% of the facility secures total flexibility for the chipmaker to scale its Intel 3 and Intel 4 process technologies.
Over time, it would also enable the company to upgrade to its highly anticipated 18A node, without having to share the upside with private equity partners.
It’s this narrative that’s helping INTC shares pop on Wednesday.
Northland Sees Further Upside in INTC Shares
Analysts at Northland Capital Markets recommend buying Intel shares into strength following the Fab 34 announcement.
In its research note, the investment firm cited a looming global shortage of 3nm capacity, adding that most artificial intelligence (AI) accelerators are shifting to this node where supply is super tight.
Since Fab 34 is a premier 3nm/4nm facility, Northland believes INTC is now in a “pole position” to fill its fabs and maximize utilization.
According to its experts, given the industry struggles with capacity constraints through 2027, Intel’s fully-owned manufacturing footprint becomes an increasingly rare and valuable asset.
Note that Northland has a $54 price objective on INTC, indicating potential upside of another 12% from here.
What’s the Consensus Rating on Intel
Other Wall Street firms, however, are not as bullish on Intel as Northland.
At the time of writing, the consensus rating on INTC stock is “Hold," with the mean price target of about $45 indicating potential downside of some 7% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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