Intel problems “probably just beginning,” analyst warns as stocks slide
The beats in revenue and earnings for the third quarter were not enough to engender much goodwill towards Intel Corp. as the company faces bigger issues related to its future.
Shares of the chip giant are down nearly 11% in trading on Friday. This would mark the second consecutive quarter of double-digit declines after earnings for Intel stock INTC,
after falling 16% following its previous earnings report, when the company admitted that its next generation of chips would be delayed and that it could seek a third party to manufacture them.
Intel hasn’t offered too many answers on its business transformation plan this time around, as management promised a broader discussion of the plan in January. But Bank of America analyst Vivek Arya argued that there are “no easy solutions” to the company’s manufacturing problems, especially given an increased competitive environment in the industry. chip industry. He downgraded Intel stock to underperform from neutral after the report.
“We admire the age of Intel, the breadth of the portfolio, the balance sheet /[free-cash flow] and strategic manufacturing based in the United States, ”he wrote. “However, the uncertainty of executing the roadmap could continue to erode Intel’s 80-85% value share in [the] PC / Data Center markets and are holding back BPA growth.
Arya cautioned against “faster and more nimble factory-less competitors such as Nvidia NVDA,
ARM-based vendors and others who are able to leverage the foundry ecosystem, ”and he questioned whether Intel’s size would be a challenge when finding foundry partners.
“[T]there is no clarity on when the decision will be made; whether Intel will go partially or completely without a factory; and for how long, ”he wrote. “It is also not clear whether a foundry has the spare capacity to manufacture the multiples. [tens of billions of dollars’ worth] of transistors, or the desire to help a competitor only for a short time while he improves his internal process and then leaves behind an empty factory.
He lowered his target price to $ 45 from $ 60.
Jefferies analyst Mark Lipacis explored a similar theme in his memo titled “Would TSMC Take INTC …?” He concluded that it probably would, but only if Intel made some sacrifices.
“If TSMC TSM,
agreed to make Intel processors on its advanced transistors as Intel strived to catch up with TSMC on transistors, TSMC may, indeed, have helped Intel to recover and take part of the highest growth customers from TSMC, AMD and Nvidia, ”he wrote. “For strategic purposes, we believe TSMC would build Intel processors on its advanced transistors only if Intel agreed to forgo manufacturing advanced transistors itself. “
Lipacis has a hold rating on Intel shares and it lowered its price target to $ 50 from $ 54.
Bernstein’s Stacy Rasgon reiterated her negative outlook on the stock, warning that next year could be worse for the company as it faces tough comparisons in the PC industry and “no doubt” loses shares in the business. AMD profit.
“The (only) bullish case here continues to be ‘cheap hope’,” with stocks trading at “multi-year discounts for the industry and the broader market,” Rasgon wrote. “But we don’t think the company’s situation is at its lowest point; on the contrary, they are probably just beginning.
He has an underperformance rating on the stock and lowered his price target to $ 40 from $ 45.
At least 15 analysts cut their price targets for Intel shares after the report, according to FactSet. Of the 40 analysts tracked by the service who cover Intel stocks, 12 have buy ratings, 18 have keep ratings and 10 have sell ratings, with an average price target of $ 54.64.
The stock has lost 20% in the past three months as the Dow Jones Industrial Average DJIA,