On Friday, CFRA reduced the price target for Intel Corporation (NASDAQ:INTC), a major player in the semiconductor industry, to $35.00 from the previous $45.00, while keeping a Hold rating on the stock. The adjustment reflects a lowered earnings per share (EPS) forecast and concerns over the company's performance in the artificial intelligence (AI) market.
Intel reported its first-quarter earnings for 2024, posting an EPS of $0.18, which surpassed the consensus estimate of $0.14. This marked an improvement over the prior year's first-quarter loss of $0.04 per share. The company's revenue increased by 9% year-over-year, driven by a 31% growth in its Client Computing group and a 5% increase in its Data Center and AI segment. However, these gains were partially offset by declines in other segments, including a 10% decrease in its Foundry services.
The company provided guidance for the second quarter of 2024 that fell short of analyst expectations. Intel forecasted revenue of $13 billion, which was below the consensus estimate of $13.6 billion. Additionally, the projected gross margin of 43.5% was lower than the anticipated 45.4%. Despite these figures, Intel anticipates a stronger performance in the second half of the year.
CFRA expressed concerns about Intel's challenges in gaining traction within the AI market. The firm highlighted the lack of order momentum for Intel's Gaudi 3, an AI processor, with expected revenue of $500 million in the second half of 2024 and potential growth in 2025. Furthermore, CFRA predicts that Intel's foundry business will continue to incur losses until 2027 and is awaiting signs of increased engagement from external customers before becoming optimistic about the company's growth prospects.
In light of these factors, CFRA has adjusted its EPS projections for Intel, lowering the 2024 estimate to $1.07 from $1.45 and the 2025 estimate to $2.20 from $2.40. The revised price target is based on a price-to-earnings (P/E) ratio of 16 times CFRA's anticipated EPS for 2025, which is below the average of Intel's industry peers. This valuation takes into account the company's subdued AI prospects as well as the broader financial outlook.
InvestingPro Insights
As Intel Corporation navigates the competitive semiconductor industry, recent data from InvestingPro provides a deeper understanding of the company's financial health and market position. Intel's market capitalization stands at $134.69 billion, reflecting its significant presence in the sector. The company's P/E ratio, at 32.85, is above the industry average, suggesting a premium valuation by the market. This is further supported by a PEG ratio of 0.14 for the last twelve months as of Q1 2024, indicating expectations of future earnings growth relative to the P/E ratio.
Despite a slight revenue decline of 2.09% over the last twelve months, Intel's quarterly revenue growth in Q1 2024 was 8.61%, showing resilience in its operations. An InvestingPro Tip highlights that net income is expected to grow this year, aligning with the company's optimistic outlook for the latter half of 2024. Additionally, the stock's recent performance indicates it is in oversold territory according to the RSI, which could suggest a potential rebound opportunity for investors.
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