2023 has seen a bit of a turnaround for Intel (NASDAQ:INTC) on several fronts. After a period of missteps, loss of market share in the CPU market to AMD, and a share price on the decline, the slide has been halted. Buoyed by improving fundamentals as has been evident in the last couple of quarterly updates, investors have reacted in kind, sending shares up by 81% throughout the year.
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The good news, according to Bank of America analyst Vivel Arya, is that as 2024 approaches, the omens bode well for the chip giant going forward.
“While we continue to highlight limited PC TAM upside and ongoing server CPU share loss to AMD/ARM, we now see faster than anticipated growth in its Automotive/Mobileye (INTC has 88% stake) and foundry (Intel 18A node ramp in CY25/26E) businesses,” the 5-star analyst said. “More importantly, we see an undervaluation of INTC’s key assets today on a sum-of-the-parts (SOTP) basis that could potentially reverse with the upcoming (catalyst) separation of design and manufacturing P&Ls in early 2024.”
Starting next year, Intel will disclose distinct financial metrics (profit and loss statements) for its design and manufacturing divisions. This move aims to facilitate a more meaningful comparison of each business unit with its relevant counterparts, such as AMD/NVDA/MRVL for the fabless design segment, and TSMC/GFS for the manufacturing segment. Furthermore, with the company still keeping a majority share, Intel is looking to turn its PSG/FPGA business into a standalone public firm in 2024. That has the potential to set up the stock for a “revaluation on a sum-of-the-parts basis.”
Additionally, in CY24/25E, CHIPS Act funding should start to affect Intel’s cash flows more substantially. And given that unlike some peers, it has little exposure to AI accelerators today, any upside on the genAI front (both industry or company-specific), “should also be generally incremental to INTC.”
The upshot of all the above is that Arya has upgraded INTC’s rating from Underperform (i.e., Sell) to Neutral, while the price objective is raised from $32 to $50. There’s now potential upside of 7% from current levels. (To watch Arya’s track record, click here)
Most on the Street are on the same page. Based on 20 Holds, 5 Buys and 3 Sells, the stock claims a Hold consensus rating. Meanwhile, the average target stands at $40.42, suggesting the shares will drop ~13% over the coming year. (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.
