3 Reasons Why BofA Says Intel's Earnings Potential Is Limited

The structural competitive risks faced by Intel Corporation (NASDAQ: 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 (NASDAQ: 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.