Intel Corp (INTC), valued at $129 billion by market cap, has long been a titan in the realm of chipmakers. Founded back in 1968, the company’s primary focus is on designing microprocessors for a variety of devices, including computers and data centers. With a broad portfolio that spans from chipsets to controllers to gaming devices, Intel’s influence can be felt across the globe, with operations in the Americas, Europe, the Asia-Pacific region, and Israel.
Intel’s Rocky Year
INTC stock has taken a beating this year, plunging a staggering 39.5% year-to-date. This sharp decline has positioned Intel as the worst-performing stock in both the Dow Jones Industrial Average and the S&P 500 Index as of the latest figures.
Intel’s Disappointing Q1 Results
On April 25, Intel unveiled its first-quarter results, revealing revenue of $12.72 billion, which fell short of analysts’ projected $12.76 billion. Despite this slight miss, the company managed to exceed market expectations for earnings per share, coming in at $0.18 compared to the estimated $0.13 per share. While free cash flow dipped into the negative territory at -$6.18 billion, there was a glimmer of hope as gross margin improved to 41% from the previous year’s 34.2% for the same period.
In its guidance for the upcoming quarter, Intel forecasted revenue of $13.00 billion and earnings of $0.10 per share, both lower than analysts’ forecasts of $13.59 billion and $0.26 per share, respectively.
Rough Transition to Foundry Business
Integrating a new operating model, Intel introduced Intel Products and Intel Foundry during this crucial period. The move aimed to enhance transparency and accountability within the organization and the external stakeholders. Despite anticipating a temporary decline in Foundry’s operating margins this year, the management is optimistic about witnessing a swift profitability uptick post-2024.
As a beneficiary of the CHIPS Act, Intel scored another win with a new contract from the Department of Defense on Intel 18A, solidifying its position in the aerospace and defense sector. With expectations to attract more customers from this segment, Intel Foundry’s phase 3 of the Ramp C program signals a promising future.
Analysts Cut their Targets for INTC
While Intel’s management struck an optimistic tone in their conference call, analysts remained cautious in their assessments. T.D. Cowen’s analyst, Matthew Ramsey, maintained a “Hold” rating but slashed the stock’s price target from $42 to $35. Expressing skepticism about Intel’s near-term outlook, Ramsey highlighted the lack of substantial catalysts and the pressing need for Intel to play catch-up with competitors like Nvidia (NVDA) and AMD (AMD).
Meanwhile, Evercore ISI’s Mark Lipacis retained a “Hold” rating but lowered the target from $40 to $36, citing Intel’s significant challenges ahead. With the majority of analysts giving INTC a “Hold” rating, the average price target now stands at $41.56, signaling a potential upside of 36.8% from the current price levels.