3 Reasons Why BofA Says Intel's Earnings Potential Is Limited

The structural competitive risks faced by Intel Corporation INTC could offset potential benefits from outsourcing to foundry, according to BofA Securities.

The Intel Analyst: Vivek Arya maintained an Underperform rating on Intel with an unchanged $58 price target.

The Intel Thesis: The company seems to have limited potential for earnings growth through 2025, “making it harder to call for multiple expansion despite the stock’s low PE,” Arya said in a note.

Although new CEO Pat Gelsinger is likely to announce plans to outsource a plethora of low-end and high-end operations to foundry, “we argue this will only help to at-best preserve EPS and likely will be insufficient to re-accelerate EPS,” the analyst said. 

Intel’s earnings potential is limited by PC and server CPUs, which generate 83% of the company’s revenues and face competition from Advanced Micro Devices, Inc’s AMD solution with superior features, he said. 

Competition from Arm Holdings in high-performance computing is another limiting factor, Arya said. 

“AI/ML workloads shift more computation to accelerators (GPU and custom ASICs) and away from x86 CPUs, with DPU/smart NICs providing further competition.” 

INTC Price Action: Shares of Intel were down 0.64% at $58.78 at the close Tuesday.

Photo: Intel Corporation.