Investing.com – Intel stock (NASDAQ:INTC) fell 2.5% Tuesday as BMO Capital downgraded it to market perform with a target of $52.
The stock is over 13% lower than analyst Ambrish Srivastava’s previous target of $60 and around 8% higher than the current price of $48.2.
According to the analyst, the chipmaker’s earnings may take long to recover. Nor is the sales growth likely to compound in double digits, the analyst believes.
Intel’s third-quarter revenue fell short of its own guidance and the chipmaker predicted lower margins in the years ahead. The company said last week gross profit margins are likely to be between 51% and 53% over the next two to three years. It sees adjusted gross margins of 53.5% in the ongoing quarter, lower sequentially as well as year-on-year basis.
Intel forecast at least $74 billion in revenue in 2022 while also spending big — capital expenditure could hit $28 billion next year and rise subsequently. The company is spending $20 billion on setting up two new chip plants in Arizona under CEO Pat Gelsinger’s plans.
It guided to higher capital spending over two to three years, which is likely to keep free cash flow and margins depressed.
The analyst said Intel has the capacity to take on more debt and that he is not suggesting dividend payout by the company being at risk. But at the same time, the company may have to tap the markets to fund both its aggressive capital expansion plans while also paying dividend, the analyst wrote.