The structural competitive risks faced by Intel Corporation INTC could offset potential benefits from outsourcing to foundry, according to BofA Securities.
The Intel Analyst: Vivek Arya maintained an Underperform rating on Intel with an unchanged $58 price target.
The Intel Thesis: The company seems to have limited potential for earnings growth through 2025, “making it harder to call for multiple expansion despite the stock’s low PE,” Arya said in a note.
Although new CEO Pat Gelsinger is likely to announce plans to outsource a plethora of low-end and high-end operations to foundry, “we argue this will only help to at-best preserve EPS and likely will be insufficient to re-accelerate EPS,” the analyst said.
Intel’s earnings potential is limited by PC and server CPUs, which generate 83% of the company’s revenues and face competition from Advanced Micro Devices, Inc’s AMD solution with superior features, he said.
Competition from Arm Holdings in high-performance computing is another limiting factor, Arya said.
“AI/ML workloads shift more computation to accelerators (GPU and custom ASICs) and away from x86 CPUs, with DPU/smart NICs providing further competition.”
INTC Price Action: Shares of Intel were down 0.64% at $58.78 at the close Tuesday.
Photo: Intel Corporation.
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