Last week was a bad week for Intel (NASDAQ:INTC). The shares took a heavy beating, falling by 8% after, for the first time, the company released separate financials for its semiconductor manufacturing segment, what is known as its foundry business, or Intel Foundry.
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The numbers didn’t look great. The segment lost $7 billion in 2023, widening from 2022’s $5.2 billion loss, while sales dropped from $27.5 billion in 2022 to $18.9 billion last year.
To discuss its new reporting segment, the company held a webinar, during which it offered a timeline for the Foundry Operating Margin reaching breakeven.
Logging in to get the lowdown, Rosenblatt’s Hans Mosesmann, an analyst ranked at 7th place amongst the thousands of Wall Street stock pros, says it “was not pretty, but we applaud management for the chutzpah to admit that the Foundry business will take years to scale properly, with an Operating Margin break-even seen in ~2027 (and a target of 30% at the end of 2030!).”
Chutzpah is about all Mosesmann applauds, however. The Intel Products division, now operating as a pure fabless unit, is expected to reach a gross margin range of 50%-55% by 2027, a prospect that Mosesmann says is “alarming even for us.” The company has acknowledged that it probably missed the boat where the “accelerator” AI part of the early industry transition is concerned, but that the strategy encompasses more than just accelerators.
Mosesmann, however, is not convinced. “We suspect that Intel will not participate in the current semiconductor AI/up cycle and continue to be skeptical of the execution and strategy, which, if it works, will be highly subsidy-needy for longer than CHIPS Act 1 was envisioned,” the 5-star analyst said.
While Mosesmann thinks the bulls will argue that the reset implies continuous growth from a low point onwards and that “they are sandbagging,” the bears can counter that by claiming the “bottom will last for years.”
It’s clear to which camp Mosesmann belongs. In fact, he remains the Street’s biggest INTC bear, imploring investors to Sell while his $17 Street-low price target factors in downside of 58% over the coming months. (To watch Mosesmann’s track record, click here)
Amongst Mosesmann’s colleagues, 3 others join him in the bear camp and with an additional 24 Holds and 5 Buys, the analyst consensus rates the stock a Hold. However, the forecast calls for one-year returns of 26%, considering the average target stands at $45.05. (See Intel stock forecast)
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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.
