When things aren’t going your way, it’s hard to snap out of the funk. Intel’s (INTC) recent woes have been well-documented, and to add insult to injury, the chip giant was forced to release its 4Q20 earnings earlier after its website was hacked, resulting in a leak of sensitive financial data.
Intel’s case wasn’t helped by the earnings call. Incoming CEO Pat Gelsinger said that the company plans on sticking to its IDM (integrated device manufacturer) model and will keep on building most of the company’s chips in-house. However, Gelsinger also said the company will continue outsourcing some of its chip manufacturing while it upgrades its manufacturing process.
Which evidently was not what investors wanted to hear. Needham analyst Quinn Bolton believes “some investors may have hoping for a higher portion of 7nm to be outsourced to improve capital efficiency.”
The lack of clarity overshadowed what was a better-than-expected report.
Intel delivered revenue of $20 billion, declining by 1% year-over-year, yet beating the estimates by $2.5 billion. There was a beat on the bottom-line too, with Non-GAAP EPS of $1.52 coming in ahead of the Street’s forecast by $0.41.
Intel didn’t provide FY21 guidance, but its forecast for Q1 revenue of $17.5 billion beat the Street’s call by approximately $1.2 billion.
While the reaction on the Street to Intel’s latest quarterly results has been decidedly mixed, Bolton believes there is much to be upbeat about.
“With new CEO Pat Gelsinger coming onboard, we believe Intel will be able to identify weaknesses in its processor roadmap and reestablish its processor performance leadership,” the 5-star analyst said. “We believe Intel will outsource some advanced manufacturing to TSMC, thereby reducing its capital intensity, improving free cash flow and improving shareholder returns. Further, we think Intel plans to protect its share in DCG from AMD by competing more on price while regaining its technological leadership with 7nm… Lastly, we believe a low valuation relative to peers suggest upside in INTC shares.”
Overall, Bolton stay with the bulls. The analyst rates INTC shares a Buy and keeps his $70 price target intact. Investors are looking at upside of 25%, should Bolton’s thesis play out accordingly. (To watch Bolton’s track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
