Intel just had a massive rally on some potentially huge news: Pat Gelsinger is the new CEO.
Gelsinger was the chipmaker’s chief technology officer until 2012. During that time, he was instrumental in key initiatives like the Xeon chip.
The market hopes he can fix one of the technology sector’s biggest messes. Intel (INTC) has struggled with manufacturing and innovation problems for years. In particular, it’s repeatedly delayed introducing newer and thinner chips. That’s given a huge advantage to smaller rival Advanced Micro Devices (AMD).
INTC’s woes haven’t only produced several gut-wrenching quarterly misses. They’ve also caused the market to discount the stock. INTC trades for just 11 times earnings and 3 times sales. AMD, in contrast, is valued more than 4 times higher on both metrics.
Investors may now start to price in some improvement and get more willing to pay higher prices for the company.
The Next Steve Jobs?
Gelsinger’s homecoming is also reminiscent of Steve Jobs’ return to Apple (AAPL) in 1997. Without its visionary co-founder, the computer maker missed out on the 1990s tech bubble. Jobs revived innovation within a few years. First the iPod, then the iPhone and the rest is history.
Can Gelsinger pull off a similar feat? It will take years to know, but there is one big similarity. Like AAPL, INTC is also a one-time leader that’s failed to participate in the current bull market.
Circumstances could also favor INTC because demand for chips is strong — especially in its legacy laptop segment.
Intel’s Hat Trick
That combination of factors — low valuations, turnaround hopes and a healthy market — lifted INTC by 6.97 percent. That made it the top gainer in the S&P 500, Nasdaq-100 and Dow Jones Industrial Average. “Hat tricks” like that almost never happen.
Volume also spiked to 124 million shares. Excluding the super-active sessions after earnings, that was INTC’s highest turnover since August 2010.
The last year has seen other big turnarounds led by visionary CEOs, like Mary Barra at General Motors (GM) and Carol Tome at United Parcel Service (UPS). Will Gelsinger and INTC join the club?