On Friday, Roth/MKM adjusted its outlook on Intel Corporation (NASDAQ: NASDAQ:INTC), reducing the price target to $25 from the previous $35 while retaining a Neutral rating on the stock.
The adjustment follows Intel's guidance for the third quarter of 2024, which projected revenue and gross margin figures significantly below market expectations in view of unanticipated client product costs.
According to the firm, Intel experienced healthy demand for client processor components designed for new AI notebooks. However, the company's gross margin suffered due to the necessity to distribute parts that were costlier than anticipated in order to meet this increased demand. This scenario has led to the contraction of Intel's gross margin.
The analysis by Roth/MKM also suggested that for Intel to improve its competitive stance in this area, the launch of next-generation products would be essential. The firm's decision to lower the price target is a reflection of these factors impacting Intel's financial performance.
The firm's commentary highlighted the need for Intel to address the gross margin contraction resulting from shipping higher-cost parts to satisfy the unexpected surge in demand. The statement from Roth/MKM emphasized, "While demand for client processor parts in support of newer AI NBs was healthy, we believe INTC's gross margin contraction reflected the need to ship higher than expected cost parts to fill this demand upside."
Meanwhile, HSBC (LON:HSBA) downgraded Intel's stock to Reduce and lowered their price target to $19.80 due to concerns about the company's gross margin. Raymond James also shifted their rating from Outperform to Market Perform, flagging ongoing margin challenges.
InvestingPro Insights
As Intel Corporation (NASDAQ:INTC) navigates market challenges, including a recent gross margin contraction, investors may find value in real-time data and insights. According to InvestingPro, Intel is currently trading at a low price-to-earnings (P/E) ratio of 30.21 relative to its near-term earnings growth, which could signal a potential undervaluation compared to its future earnings potential. Moreover, the company stands out as a prominent player in the Semiconductors & Semiconductor Equipment industry and has shown a commitment to returning value to shareholders by maintaining dividend payments for 33 consecutive years.
InvestingPro data further reveals that Intel has experienced a 6-month price total return of -31.33%, reflecting the stock's significant decline over the period. Despite this, analysts predict the company will be profitable this year, with a basic EPS (Continuing Operations) for the last twelve months as of Q1 2024 at $0.97. Additionally, the company is trading near its 52-week low, which might be of interest to investors looking for entry points in the context of long-term value investing.
For investors seeking more comprehensive analysis and additional insights, InvestingPro offers a range of tips, including 7 additional tips not mentioned here, to help navigate the investment landscape surrounding Intel. These can be accessed by visiting https://www.investing.com/pro/INTC.
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