Intel (NASDAQ: INTC) has witnessed a surge in insider stock purchases coinciding with the announcement of a $3.5 billion United States government contract award.
The number of shares purchased by insiders skyrocketed to approximately 12,500 in Q3 2024, reflecting a 43% year-over-year growth. In comparison, only 7,009 shares were bought in the same period in 2023, according to data retrieved from the stock market tracking platform Quiver Quantitative on September 17.
The spike in insider trading is noteworthy, especially considering the trend earlier this year when purchases had dipped to 5,800 shares in Q1. However, by the second quarter, the number had surged to 8,100.
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This momentum has only accelerated, aligning with the company’s award of a Pentagon deal to manufacture chips for the military. The agreement is under the Secure Enclave program, which seeks to produce advanced chips with military and intelligence applications.
It’s critical to note that insider trading is not always suspicious since, in some cases, it reflects executives’ confidence in a company’s future. However, the proximity of these transactions to the Pentagon deal raises questions about whether the insiders were motivated by information not available to the public.
Already, INTC is reacting to the news as pre-market trading indicates that the stock has rallied 6.7%, trading at $22 ahead of the market opening on September 17.
INTC stock reaction
The positive reaction of the stock to this development is a much-needed boost for Intel, which has seen its stock drop 56% in 2024 while failing to keep up with peers such as Nvidia (NASDAQ: NVDA). This performance has had a far-reaching impact, earning Intel a spot among the worst-performing S&P 500 stocks in 2024.
With that being said, in the short term, INTC has been gaining trading at $20.91 during the latest market close, reflecting a weekly rally of almost 10%.
INTC technical outlook
From a technical perspective, stock market analysts like Mike Zaccardi believe that INTC is gearing up to rally toward the $30 mark.
In an analysis shared in an X post on September 16, Zaccardi observed that after a sharp decline from its highs near $48 in February, INTC had faced consistent downward pressure. However, the stock has recently formed a base, with signs of stabilization and an upward trend beginning to take shape.
Volume and price action over the past few weeks project that Intel’s worst days may be behind it. With the stock trading near $20, a break above this resistance could pave the way for a rally back to $30.
Impact of Pentagon deal on Intel stock
Meanwhile, revenue from the Pentagon contract could boost investor interest after Intel witnessed challenging returns for Q2 2024. For the quarter, the revenue dropped 0.9% year-over-year to $12.83 billion, missing analysts’ estimates of $12.94 billion.
To complicate matters, Intel made a disappointing announcement for income investors in the latest earnings report: It will not be paying dividends in the fiscal fourth quarter of 2024.
In a bid to turn fortunes around, the firm has announced a significant restructuring plan to regain its status in the semiconductor space. Part of the plan will see Intel enact a 15% reduction in its workforce to reduce its expenditures by $10 billion.
If the restructuring is successful, it could be an opportunity to sway analysts’ sentiment on the stock, which had received notable downgrades following the disappointing Q2 results. For instance, HSBC experts downgraded INTC to “Reduce” from “Hold,” citing massive Q2 2024 margin misses.
“Intel management is guiding for above seasonal 4Q24 recovery given much weaker 3Q24 base and remains bullish about product roadmap as well as its long-term strategy in foundry business model. <…> However, any guidance or focus on cost reductions and capex cuts will be overshadowed by lack of investor confidence which will take some time restore,” the analysts said.
In summary, Intel’s surge in insider stock purchases and the major Pentagon contract signals a potential turning point for the company. While the timing of these transactions is questionable, the new restructuring initiative and potential revenue boost could help restore investor confidence. However, the near term will be critical as Intel aims to turn things around from past setbacks.
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