The disaster streak of the semiconductor industry continued with the disappointing Q2 results of Intel (INTC), garnished with dismal full-year guidance. Nonetheless, having faith in the phrase ‘max pain means BUY,’ Needham analyst Quinn Bolton decided to reinforce a Buy rating on the stock with a price target of $40.
Last week, the world’s largest semiconductor company delivered what seems to be its “worst performing quarter for many years to come,” giving investors a great window of opportunity to accumulate INTC shares. Among a few things to celebrate in the Q2 results was the surge in Mobileye revenues, supported by higher uptake of advanced driver assistance systems (ADAS).
Granted, Bolton expects the debacle to continue in Q3 as well; however, it is the long-term view and the fundamental strength of Intel that is keeping the analyst bullish.
Some Strengths to Consider
One of the things that Bolton is hopeful about is the leadership qualities of Intel’s new CEO, Pat Gelsinger, who came into the office early in 2021. “With new CEO Pat Gelsinger coming onboard, we believe Intel will be able to identify weaknesses in its processor roadmap and re-establish its processor performance leadership,” said Bolton.
Notably, Intel intends to produce most of its 7nm products internally by 2023, which is expected to be an advantage for the company in terms of economies of scale and market share gain in the Data Center Group (DCG) segment. “We believe Intel will follow through with its plan to aggressively protect its DCG share from Advanced Micro Devices (AMD) while regaining its technological leadership with 7nm,” observed Bolton.
Bolton sees Intel’s gross margin continuing to be affected in the near term by its consistent investments in CPU design and process technology. However, these investments are necessary to bolster Intel’s market leadership in the CPU area. Once that happens, it will give the company ample opportunity to recover its margins.
Meanwhile, Wall Street analyst consensus suggests investors wait on the sidelines for a better entry/exit point, giving Intel a Hold rating based on three Buys, 16 Holds, and eight Sells. The price target currently stands at $39.70, reflecting an upside of 6.63% from Monday morning’s price levels.
Parting Thoughts: It’s a Matter of Time Before INTC Climbs Back to the Top
One should not forget that the semiconductor industry, in general, has been wading through troubled waters ever since the COVID-19-induced boom went bust. Moreover, inflation and supply shortages made things worse for the industry.
In any case, Intel has a plan in place to navigate the business through inflation. Moreover, it is pushing ahead strongly to regain its leadership position in the chip-making industry, and going by Bolton’s stance, the company should regain its lost value, and then much more, in the coming years.
