As you may already know, Intel (NASADQ:INTC) has undergone a restructuring of its business. It now reports separate financials for its Product (fabless) and Foundry (which includes internal manufacturing) segments. According to the company, the overhaul is meant to result in better cost management and boost profits by offering improved transparency, accountability, and incentives throughout the organization.
That’s all well and good, but ultimately, says Bank of America analyst Vivek Arya, it doesn’t alter the bigger picture.
“Despite INTC’s new reporting structure that treats Intel Products and Intel Foundry as separate business units (via separate P&Ls), we see Intel’s manufacturing (Foundry) as still fully reliant/dependent on the internal design team (Products),” said Arya, an analyst ranked at 10th spot amongst the thousands of Wall Street stock pros. “We thus believe the two should not be valued as separate entities, but rather as one single IDM business.”
Taking a closer look at the bullish and bearish views on Intel right now, on the plus side Arya points to the cyclical rebound following inventory normalization in CY22-23, along with the forthcoming end of life for Win10 in October 2025, which could bring PC shipments nearer the 300 million unit target by CY26E, thereby acting as a “near-term tailwind.” Additionally, Apple’s M4 refresh to its Mac lineup could “invigorate new use cases/applications for AI PCs.” There’s also the prospect of Foundry profitability, which might be bottoming out now but is anticipated to gradually recover, with breakeven projected by CY26-27.
However, those are countered by several bearish arguments. For one, the chip giant lags badly in the AI field, with data-centric/AI sales still at or lower than 40% of total sales, some distance behind design peers’ 60-80%+.and while the company announced the release of Gaudi3 accelerators for Q2, Arya anticipates “modest initial traction at less than 1% share, or sub-$1bn run-rate.” As for the foundry business, alternative options in the U.S. are rapidly emerging, with TSMC and Samsung both – like Intel – poised to receive substantial CHIPS Act grants.
So, where does Arya stand? Somewhere in the middle. The 5-star analyst reiterated a Neutral rating on Intel shares and given a “new valuation methodology,” lowered his price target from $50 to $44. Nevertheless, the new figure still makes room for one-year returns of 21%.
Amongst Arya’s colleagues, most also remain on the fence. Based on a mix of 24 Holds, 5 Buys and 4 Sells, the analyst consensus rates the stock a Hold. And like Arya, most still think the shares (down 27% year-to-date) have been hit too hard; according to the $45.05 average target, the stock will climb 24% higher over the one-year timeframe. (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.
