Buoyed by all things AI, the demand for semiconductor chips has skyrocketed. Consequently, the PHLX Semiconductor Index, the industry’s main barometer, has risen by 30% year-to-date, even after today’s sell-off.
However, not all chipmakers have thrived. Intel (NASDAQ:INTC), for instance, has missed out on the gains. The fallen giant is stuck in a rut and its stock has shed 31% since the turn of the year.
According to Northland’s Gus Richard, an analyst ranked in the top 1% of Wall Street stock experts, it’s not about to get much better any time soon. Given new export restrictions to Huawei, losing share in the server CPU market to AMD, and the “expectation that PC demand will be weaker than expected in 2H:24,” the 5-star analyst has now lowered some estimates.
Richard now sees Q2 revenue reaching $12.8 billion, down from the prior $13 billion (adj. EPS stays at $0.10). Additionally, Richard sees CY24 adj. EPS and revenue coming in at 0.90 and $54.9 billion, respectively, vs. the prior $1.05 and $56.1 billion.
“A weaker consumer globally and higher DRAM prices contribute to our expectation of weaker demand in 2H:24,” the analyst explained.
However, for Intel investors feeling the pain, Richard advises patience. While “waiting for the turnaround is painful,” the analyst believes a corner will be turned eventually.
While Intel has reported some disappointing results, they are “not thesis-breaking.” And as the number #2 foundry, Samsung, keeps on having issues in the leading-edge logic market, in contrast, Richard thinks Intel is “making good progress in becoming a foundry.”
“We believe INTC is the only viable alternative to TSMC at the leading edge,” he goes on to elaborate. “AMD spun off its fab in 2008, and Global Foundries went public 13 years later. It took the new CEO at AMD in 2014, three years to turn around AMD. Intel’s CEO has been at it for three years. Given the shape of AMD and GF in 2008, if they can create significant holder value, INTC, with all its assets, should be able to do the same.”
Accordingly, Richard rates INTC shares as Outperform (i.e., Buy), while his Street-high $68 price target makes room for 12-month returns of 97%. (To watch Richard’s track record, click here)
Overall, only 2 other analysts join Richard in the bull camp, and with an additional 24 Holds and 3 Sells, the stock claims a Hold consensus rating. Going by the $38.02 average target, a year from now, shares will be changing hands for an 10% premium. (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.
