CFRA cut the price target on Intel Corporation (NASDAQ:), a major player in the semiconductor industry, to $35.00 from the previous $45.00 on Friday, maintaining a Hold rating on the stock. The adjustment reflects lower earnings per share (EPS) forecasts and concerns about the company’s performance in the artificial intelligence (AI) market.
Intel reported first quarter 2024 earnings, with EPS of $0.18, which beat consensus estimates of $0.14. This is an improvement over the prior year’s first quarter loss of $0.04 per share. The company’s revenue increased 9% compared to the previous year, thanks to 31% growth in the Client Computing group and 5% growth in the Data Center and AI segment. However, these increases were partially offset by declines in other segments, including a 10% decrease in Foundry Services.
The company provided guidance for the second quarter of 2024 that fell short of analysts’ expectations. Intel forecast revenue of $13 billion, below consensus estimates of $13.6 billion. Additionally, the expected gross margin of 43.5% was lower than the expected 45.4%. Despite these data, Intel expects a stronger performance in the second half of the year.
CFRA has expressed concern about Intel’s difficulties gaining traction in the AI market. The company highlighted the lack of order momentum for Intel’s Gaudi 3 AI processor, with expected revenue of $500 million in the second half of 2024 and potential growth in 2025. Additionally, CFRA expects the Intel’s foundry business will continue to suffer losses through 2027 and it awaits signs of increased commitment from external customers before becoming optimistic about the company’s growth prospects.
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In light of these factors, CFRA adjusted its EPS projections for Intel, lowering its 2024 estimates to $1.07 from $1.45 and its 2025 estimates 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 forecast EPS for 2025, which is lower than the average of Intel’s industry peers. This rating takes into account the company’s poor AI outlook and broader financial outlook.
Insights from InvestingPro
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 is $134.69 billion, reflecting its significant presence in the industry. The company’s P/E ratio of 32.85 is higher than the industry average, which suggests the market values it positively. This is further supported by a PEG ratio of 0.14 for the trailing twelve months as of 1Q 2024, indicating expectations of future earnings growth relative to the P/E ratio.
Despite a slight revenue decline of 2.09% over the trailing twelve months, Intel’s quarterly revenue growth in 1Q24 was 8.61%, demonstrating the resilience of its business. An InvestingPro tip highlights that net income is expected to grow this year, aligning with the company’s optimistic forecast for the second half of 2024. Furthermore, the stock’s recent performance indicates that it is in oversold territory according to the RSI, which could hint at a potential rebound opportunity for investors.
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