On Tuesday, Exane BNP Paribas (OTC:BNPQY) maintained its underperform rating on Intel Corporation (NASDAQ:INTC) with a steady price target of $18.00. The firm acknowledged Intel's recent success in securing a significant client for its 18A process technology.
Despite the news last week that Broadcom (NASDAQ:AVGO) was unimpressed with Intel's 18A test chip results, Intel management highlighted the low defectivity rates of its 18A process at a recent conference. They indicated that the defect density of 0.4 defects per square centimeter was below the industry's acceptable threshold for high-volume manufacturing.
The announcement that Amazon (NASDAQ:AMZN) Web Services (AWS) has chosen Intel's 18A process for its Fabric chip, which is likely a networking component, was seen as a vote of confidence in Intel's technology.
However, the firm noted that while this win is a positive development, it may not lead to substantial volume increases in Intel's Foundry business. The analyst pointed out that Intel requires significant processor design wins to achieve its target of $15 billion in additional foundry revenue, which would contribute to a 40%/30% Foundry business model.
The report also touched upon the ongoing strategic shift within Intel, suggesting that the increasing separation of Intel Foundry from the company's other operations could indicate a potential spin-off in the future. This strategic move is seen as becoming more urgent as Intel continues to lose market share to competitors such as AMD (NASDAQ:AMD) and ARM.
The firm's analysis suggests that while the AWS deal is a step in the right direction, Intel still faces challenges in ramping up its foundry business to the desired levels of profitability and market share.
InvestingPro Insights
Intel Corporation's (NASDAQ:INTC) current market dynamics and financial metrics can be further understood through InvestingPro Insights. With a market capitalization of $94.41 billion and a trailing P/E ratio that has adjusted to 43.66, Intel's valuation reflects its position within the semiconductor industry. Despite a modest revenue growth of 1.99% over the last twelve months as of Q2 2024, the company has experienced a slight quarterly revenue decline of -0.9%. Intel's gross profit margin remains robust at 41.42%, indicating the company's ability to maintain profitability in its operations.
InvestingPro Tips suggest that Intel is trading at a low P/E ratio relative to near-term earnings growth, which could be appealing to value investors. Moreover, as a prominent player in the Semiconductors & Semiconductor Equipment industry, Intel's long-standing market presence is underscored by maintaining dividend payments for 33 consecutive years, despite predictions of net income dropping this year. For investors seeking more comprehensive analyses, there are additional InvestingPro Tips available that delve deeper into Intel's financial health and market performance.
It's also noteworthy that the stock's price has experienced a significant fall over the last three months, with a 36.14% decline, which might attract investors looking for potential rebound opportunities. The InvestingPro Fair Value estimate stands at $22.58, suggesting a potential undervaluation compared to the previous close price of $20.91. As Intel navigates its strategic shifts and aims for foundry business growth, these financial insights and expert tips could prove invaluable for investors monitoring the company's progress.
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