On Friday, Rosenblatt Securities adjusted its stock price target for Intel Corporation (NASDAQ:INTC), raising it to $20.00 from the previous $17.00, while maintaining a Sell rating on the stock. The firm's analysis followed Intel's third-quarter financial performance, which reported revenues of $13.3 billion. This figure represented a marginal beat, attributed primarily to the sale of inventory previously written down.
Intel's non-GAAP earnings per share (EPS) for the third quarter stood at a loss of $(0.46), which was significantly below both the analyst's and consensus estimates of $(0.01). This discrepancy was largely due to substantial restructuring charges that the company incurred. Both the Client Computing Group (CCG) and Data Center and AI (DCAI) segments performed slightly under expectations.
Looking ahead, Intel's forecast for the fourth quarter of 2024 anticipates revenues of $13.8 billion, which is a bit lower than Rosenblatt's projection of $14.0 billion but slightly higher than the consensus estimate of $13.7 billion. The market is currently navigating through various challenges, including mixed dynamics in product demand and foundry operations, as well as typical seasonal adjustments and inventory realignments.
Intel's management is focused on resizing operations to align with market conditions. Their goal is to achieve positive free cash flow in 2025, despite facing gross margin pressures due to the ramp-up of the 18A process node in 2026.
Additional factors contributing to the financial outlook include the high costs associated with the Lunar Lake CPU mix and a slower-than-anticipated transition to the Gaudi AI accelerator, which the analyst believes has already fallen behind the product cycle.
The analyst's report concluded that while Intel has addressed a significant portion of the upfront costs associated with its strategic transition, the tangible benefits are not expected to materialize until 2026. Therefore, 2025 is projected to be yet another year of transition for the company. The revised price target of $20.00 is based on a mid-teens price-to-earnings (P/E) multiple derived from Rosenblatt's 2026 EPS estimates.
In other recent news, Intel Corporation has withdrawn its sales forecast for its Gaudi accelerator chips after failing to meet revenue targets, attributed to software issues and the transition to the third generation of the chip.
Despite this, Intel reported a third-quarter revenue of $13.3 billion, surpassing analyst estimates, though it faced a significant loss of $16.6 billion due to impairment and restructuring charges. Analysts from firms such as Bank of America and Running Point Capital have expressed concerns and skepticism regarding Intel's position in the AI market and its overall strategy.
Deutsche Bank maintained its Hold rating on Intel, noting the company's progress in manufacturing technology and product roadmap, despite the multi-year transformation process the company is undergoing. Intel's Foundry services have gained traction with three new customers for its 18A manufacturing process.
Citi, on the other hand, adjusted its outlook on Intel, reducing the company's price target and expressing skepticism regarding the viability of Intel's foundry business, suggesting a strategic exit from this sector might be beneficial for shareholders.
Barclays maintained its Equalweight rating on Intel, acknowledging slight gains in the company's Data Center and AI Group (DCAI), but expressing caution about the company's core business competitiveness, process technology, and cash flow generation. These recent developments underscore the challenges Intel faces as it navigates the competitive semiconductor industry.
InvestingPro Insights
Recent InvestingPro data provides additional context to Intel's current financial position and market performance. As of the last twelve months ending Q2 2024, Intel reported revenue of $55.12 billion, with a slight growth of 1.99%. However, the company's profitability metrics paint a mixed picture. While Intel remains profitable with a P/E ratio of 47.79, its operating income margin stands at a slim 0.92%, reflecting the challenges mentioned in the article.
InvestingPro Tips highlight Intel's position as a prominent player in the Semiconductors & Semiconductor Equipment industry, aligning with the article's focus on the company's strategic transitions and market challenges. The tip noting that Intel's net income is expected to drop this year corroborates the analyst's cautious outlook for 2025 as another transition year.
It's worth noting that Intel's stock price has fallen significantly over the last three months, with a total return of -25.45%. This decline aligns with the analyst's decision to maintain a Sell rating, despite raising the price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Intel, providing a broader perspective on the company's financial health and market position.
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