Intel: Citi currently sees limited 'upside' as bull-bear debate rages on
Intel (NASDAQ:INTC) is the recipient of some "cautious" commentary on Wall Street as Bank of America notes the company is facing increasing competition in its businesses and its long-term plan may not play out as the company believes, but the company is being led by "a driven and experienced management team."
Analyst Vivek Arya, who rates Intel (INTC) underperform with a $47 price target, noted that Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing (NYSE:TSM) and Arm are eating away at Intel, while it also has a "large exposure" to a declining PC market, which accounts for roughly 45% of sales and 50% of fab loadings.
It also has a strategic risk, with its move into the foundry business, concerns about its operations, as it has produced five nodes in four years and concerns about how much cash it will burn as it builds out its foundry business.
On the other hand, Intel (INTC) has a driven management team, led by Chief Executive Pat Gelsinger and is exposed to "attractive compute end-markets." Investor expectations for Intel (INTC) are also low and there is "strategic value" in geopolitics and it is aligned with manufacturing incentives with the U.S. and European Union.
"However, these advantages will, in our view, only bring INTC back to its CY20/21 EPS/free cash flow, suggesting limited stock upside," Arya wrote in a note to clients.
Intel shares were lower in premarket trading, down more than 2% to $47.80.
In addition, Arya said that the company's decision to invest in fabs "implies that a simple PE (which does not capture rising capex vs. fabless rivals) or sum-of -the-parts (no catalyst for break-up) could be incomplete valuation metrics."
In February, Gelsinger, along with Chairman Ishrak Omar, both purchased the chipmaker's stock for the first time in months.