Intel (NASDAQ:INTC) shares have been mostly on a downward streak lately, but the stock seems to be enjoying a strong week so far.
The stock has surged roughly 9% over the past two trading sessions in what appears to be a positive reaction to an update that featured several announcements.
For one, the company is set to receive up to $3 billion in direct funding through the CHIPS and Science Act for the Secure Enclave program, which is centered on projects for the U.S. Department of Defense.
Intel also announced a new agreement with Amazon to develop a custom AI chip for the ecommerce giant. The collaboration marks a multi-year, multi-billion-dollar partnership, focused on Intel’s advanced 18A process node technology. As part of the deal, Intel will manufacture an AI fabric chip for AWS using the 18A node, along with a Xeon 6 chip on the Intel 3 process, building on their prior partnership in which Intel supplied Xeon Scalable processors for AWS.
But that’s not all. In a separate letter to employees, CEO Pat Gelsinger also disclosed some changes to the company’s structure. Intel will establish its chip foundry division, Intel Foundry, as an independent subsidiary, although the foundry will retain its current leadership and continue to operate within Intel. The struggling chip giant will also halt its chip fabrication projects in Poland and Germany for a couple of years. Additionally, it will evaluate the possibility of scaling back its chip packaging and testing operations in Malaysia.
Digesting the updates, Stifel’s Ruben Roy, a 5-star analyst ranked in the top 1% of Wall Street stock pros, thinks they are “important steps in the right direction.”
That said, much still needs to be done for Intel to properly turn a corner.
“We continue to believe that INTC has a long road to recovery ahead as the company aims towards regaining its product roadmap, manufacturing leadership and financial (liquidity and cash flow) footing,” Roy opined. “In the meantime, competitive dynamics in both the company’s core PC segment and critical data center/AI segment are likely to become increasingly challenging, in our view. We do think that the AWS announcement reinforces INTC’s 18A progress and that the node is likely healthy at this point. Again, a good first step ahead of execution on volume manufacturing.”
Bottom line, Roy rates Intel shares a Hold (i.e., Neutral), although he might have just as well said Buy given his $28 price target suggests the shares have a one-year upside of 30%. (To watch Roy’s track record, click here)
Overall, Wall Street analysts remain largely cautious, with 26 Hold ratings, 6 Sells, and just 1 Buy, resulting in a consensus rating of Hold. While the average price target of $26.09 indicates a potential 21.5% upside from current levels, many analysts appear to believe that the risks outweigh the potential rewards at this stage. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
