Intel analyst: “Storyline seems concerning”
Some analysts were less than impressed with new CEO Lip-Bu Tan’s first quarterly conference call at Intel.
Intel’s post-earnings sell-off continued on Friday, with several analysts who cover the company putting out skeptical to bearish takes on Q1 results and the weak outlook the chip giant offered Thursday after the close.
Barclays analysts, who cut their full-year sales and earnings-per-share estimates for the company but kept their “neutral” rating and $19 price target for the stock, seemed unnerved by the fact that customers were boosting purchases of Intel’s older, cheaper, less-than-cutting-edge chips, perhaps because they were jittery about the economy. They wrote:
“The company was more enthusiastic about n-1/n-2 PC and server product, where customers have supposedly re-engaged to save in turbulent tariff times. This entire storyline seems concerning to us. While improving [gross margins] near-term, this does not bode well for leading-edge product, nor AI PC, where the company revised targets lower.”
JPMorgan analysts cut their Intel target from $23 to $20 a share, axed full-year EPS estimates from $0.53 to a penny, and maintained their “underweight” rating. They seemed unimpressed with the first performance from former Cadence Design CEO Tan, who was tapped to take the top job at Intel last month.
“New CEO, Lip-Bu Tan, highlighted several new strategic initiatives including creating a flatter/leaner leadership structure in efforts to drive more costs out of the business and improve FCF generation. However, Lip Bu did not provide much insights/detail on how he will return Intel back to a leadership position in core compute and leading edge manufacturing — nor did he provide much insights into how he would attract more external foundry customers to Intel Foundry.”
The fate of Intel’s foundry business — where Intel makes chips on behalf of others, sort of the way TSMC does — was also a sticking point for analysts at Citibank, who cut their earnings estimates but maintained their “neutral” rating on the stock and $21 target for shares.
“It appears Intel is committed to becoming a merchant foundry. We continue to believe Intel shareholders would be better served by the company exiting the merchant foundry business given mounting losses.”
Intel was recently down 7.8% in morning trading.
