This year has been defined by a shift in sentiment toward Intel (NASDAQ:INTC). Investors appear to be warming to a turnaround story, with the company’s Q2 results beating the Street’s expectations amid signs the PC market is on the path to recovery.
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The exuberance around the stock can be seen via its performance over the past 3 months. Whereas the SOX – the semiconductor industry’s main index – has retreated by 10%, INTC shares are up by 6% over the same period.
With the chip giant about to report Q3 earnings (slated for October 26), is the scene set for further gains? Not according to Goldman Sachs analyst Toshiya Hari.
Ahead of the print, Hari maintained a Sell rating on the shares, one that goes along with a $28 price target. That figure represents downside of 22% from current levels.
With that said, the 5-star analyst’s take on Intel is not wholly negative. “On a positive note,” says Hari, “we recognize 1) the improving PC and stabilizing enterprise server demand backdrop (which are both positive for Intel), 2) the company’s improved execution (i.e. Intel has introduced new products and process technologies mostly in line with its original commitments), and 3) potential benefits associated with ongoing cost optimization initiatives, particularly those related to the transition to an internal foundry model.”
In fact, Hari’s has made some “minor positive adjustments” for his 2023-25 revenue estimates that factor in a “stronger recovery” in server CPUs, partially offset by a potential year-over-year drop for the firm’s FPGA business.
But on the other hand, the Goldman analyst has lowered his 2023/24/25 non-GAAP gross margin (incl. SBC) expectations on the assumption the ramp of new products on new process technologies will result in “stronger headwinds.” That has also resulted in 2023/24/25 non-GAAP EPS estimates (incl. SBC) being reduced from ($0.01)/$1.15/$2.00, respectively, to ($0.02)/$0.47/$1.40, with Hari noting that the updated 2024/2025 earnings estimates “sit well below Street/FactSet consensus.”
Therefore, before potentially “turning more constructive,” Hari waits for signs of a “stabilization in Data Center wallet share” and evidence the IDM 2.0 strategy is the right one to take the company forward. (To watch Hari’s track record, click here)
Hari’s bearish take gets the support of 4 other analysts, and with the addition of 20 Holds, and 6 Buys, the stock claims a Hold consensus rating. The average target currently stands at $36.63, indicating that most on the Street think the shares are currently trading for their fair value. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
