Since the start of the year, Intel’s (NASDAQ:INTC) programmable chip unit has been operating as a separate entity. Now the company has announced that the FPGA (field-programmable gate array) business, which currently operates under the PSG (programmable solutions group) moniker, will be rebranded to Altera. If that sounds familiar, it’s hardly surprising, as Altera was initially acquired by Intel in 2015. An IPO is expected to take place in roughly two to three years.
Logging into the chip giant’s recent FPGA Vision Webcast, during which the company revealed the rebranding, Bank of America’s Vivek Arya, an analyst ranked in the top 20 amongst thousands of Wall Street stock experts, sees the positives in such a move.
“Importantly, we expect the new standalone company led by former DCAI segment head Sandra Rivera to have greater product execution, speed, and agility in competing against AMD’s Xilinx and Lattice,” said the 5-star analyst. “INTC has consistently lost FPGA market share over the last five years (from high-30% pre-2019 to just ~20% today, and we expect this increased management focus as the first major step in stabilizing shares going forward.”
Intel thinks the FPGA market’s TAM could rise from ~$10 billion in CY23 to $13 billion+ by CY28E, and Arya notes the segment remains an “incremental source of growth,” boasting high gross margins of typically more than 70%. The spinoff could assist in allocating “appropriate resources in building product competency” and potentially increase market share. However, even before the foundry business ramps, it’s worth noting that FPGAs currently constitute just 2-3% of INTC’s overall sales and the core x86 design and manufacturing businesses are still under pressure from growing competition (Arm CPUs), the shift in spending towards accelerators, and the substantial capital requirements of the foundry business.
Therefore, while Arya considers the business’s separation an “incremental positive longer-term to INTC’s sum-of-the-parts argument,” over the near-term, it will have a “limited impact to overall fundamental outlook.”
To this end, Arya we maintained a Neutral rating on INTC and $50 price objective, which implies 15% upside potential from current levels. (To watch Arya’s track record, click here)
Staying on the sidelines currently appears to be the preferred stance among analysts regarding INTC’s prospects. Joining Arya on the fence, 23 other analysts remain neutral, while 8 recommend buying and 4 suggest selling, resulting in an analyst consensus rating of Hold. With an average target of $46.95, the stock is expected to yield ~8% in the coming months. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
