Intel Corp.’s latest earnings are further proof to at least one analyst that the company’s most painful days are in the past.
But as Intel shares
INTC,
were shooting 10.3% higher in Friday trading and heading toward their best single-day performance in a year, Wall Street analysts didn’t necessarily seem convinced that the chip maker has a rosy future ahead.
“Overall the company does appear to have turned the corner on the worst of it, and (perhaps) a PC-dominated narrative might be enough to carry it for the moment,” Bernstein analyst Stacy Rasgon said in a note to clients. “We admit to warming (slightly) to the story though there remains enough wood to chop here to keep us sidelined for now.”
Intel late Thursday topped expectations with its latest results, driven by a big beat in the company’s client segment, which represents its personal-computer business. The company also offered an upbeat outlook.
Rasgon, though, still has concerns about data-center trends, noting that performance there “continues to suffer from significant headwinds on both revenue and profitability (even with supposedly record pricing
and improving Sapphire mix).”
In his view, it’s “likely that share losses have probably resumed,” and Intel’s artificial-intelligence narrative “still seems marginal.” Plus, he noted, the company is burning cash.
He reiterated a market-perform rating on the stock, though he lifted his target price to $36 from $34.
Baird analyst Tristan Gerra offered a similar perspective.
“Intel is well entrenched in a revenue and gross margin recovery, post a [first-quarter] trough,” Gerra wrote. “However, despite strong execution recently Intel continues to face formidable challenges including generating sufficient revenue growth to fund future node migrations notably absent a competitive GPU architecture, initial inroads for ARM-based architectures, and possible challenges ramping new node production in much higher volumes than what Intel will ship with Intel 4.”
He rates the stock at neutral with a $40 target.
At least one former bear has changed his tune on Intel shares in the wake of the latest earnings, although he took a measured view as well.
“While we still have concerns over the overall [data-center] recovery, we upgrade Intel to Hold as we expect significant earnings revisions from better execution and improving PC outlook to lead to a re-rating,” HSBC analyst Frank Lee wrote, as he abandoned his prior “reduce” stance.
Chris Caso of Wolfe Research, meanwhile, stuck with his bearish call.
“For [calendar 2024], we expect client to normalize and data-center to lag (with continued share loss) — but the biggest [calendar 2024] question is on [gross margins], and it was puzzling that the company declined to clarify margin commentary they discussed earlier this quarter,” he wrote.
Caso’s underperform rating “continues to be underpinned by our view that [Intel] burns cash and experiences modest margin improvement next year, in contrast to our expectations for a stronger recovery elsewhere in semis,” he wrote, while keeping a $31 target price.
Raymond James analyst Srini Pajjuri was far more upbeat.
“While Intel won’t likely get much credit for AI in the short term, green shoots are emerging with the company’s Gaudi 2 accelerator pipeline doubling in the past 90 days,” he noted.
In Pajjuri’s view, sentiment will “continue to improve on moderating share losses, improving execution, margin recovery, Foundry progress, and emerging AI opportunity.”
He maintained an outperform rating while boosting his price target to $42 from $40 in a note to clients titled: “Turnaround Story Getting into a Higher Gear.”
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