Goldman Sachs (NYSE:GS) has adjusted its outlook on Intel Corporation (NASDAQ: NASDAQ:INTC), reducing the 12-month price target from $22.00 to $21.00 while keeping a Sell rating on the stock.
The revision comes as a proactive measure ahead of Intel's third-quarter 2024 earnings report, which is scheduled to be released on October 31 after the market closes.
The firm's decision to lower the target is based on revised non-GAAP earnings per share (EPS) estimates for 2025 and 2026, which have been reduced by 7%.
This adjustment reflects expectations of a slower recovery in Intel's PC CPU and FPGA businesses. However, this outlook is somewhat balanced by a more optimistic view of the server CPU segment.
Goldman Sachs has expressed caution regarding Intel's stock, citing the absence of clear indicators of a return to process technology leadership. The analysis suggests that Intel may continue to outsource a significant portion of its client CPU production to TSMC beyond 2025. Additionally, the firm highlighted Intel's lack of a significant presence in the profitable data center accelerator market as a reason for maintaining the Sell rating.
In other recent news, Taiwan Semiconductor Manufacturing Co (TSMC) reported profits that surpassed market expectations, projecting a significant rise in fourth-quarter revenue due to strong demand for artificial intelligence chips. Intel Corp . and AMD (NASDAQ:AMD) have announced the establishment of the x86 Ecosystem Advisory Group, aiming to enhance the x86 architecture's capabilities.
Meanwhile, ASML Holding NV (AS:ASML) has reduced its sales forecast for 2025, causing concerns about a potential slowdown in global chip demand. However, analysts suggest that the situation may indicate an overcapacity issue at chip factories rather than a decrease in demand.
The Mexican government is currently engaging with several industry leaders, including General Motors (NYSE:GM), Foxconn (SS:601138), DHL, Stellantis (NYSE:STLA), and Intel, to decrease reliance on Asian imports and bolster local production capabilities. These discussions could potentially lead to increased investment in Mexican production facilities and infrastructure.
The third-quarter earnings season has started on a strong note, supported by robust economic data. However, analysts have cautioned about potential risks, including stretched valuations, high earnings expectations, and possible market volatility. The Federal Reserve is widely expected to cut interest rates by 25 basis points at its upcoming meeting in November, according to CME's FedWatch tool.
InvestingPro Insights
As Intel prepares to release its Q3 2024 earnings on October 24, InvestingPro data offers additional context to Goldman Sachs' cautious stance. Intel's current P/E ratio stands at 98.43, which aligns with the InvestingPro Tip indicating that the company is "Trading at a high earnings multiple." This high valuation multiple could be a concern for investors, especially given the challenges highlighted in the article.
Despite these challenges, InvestingPro Tips reveal that Intel remains a "Prominent player in the Semiconductors & Semiconductor Equipment industry" and has been "Profitable over the last twelve months." However, the company's stock price has "fallen significantly over the last three months," with a -34.85% price total return in that period, reflecting the market's current skepticism.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Intel, providing a broader perspective on the company's financial health and market position.
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