Intel's $10B Cost Cut Seen as Necessary but Not Enough for Competitive Edge: Analyst

Goldman Sachs analyst Toshiya Hari maintained a Sell rating on Intel Corp INTC with a price target of $22.

While Hari considered the latest cost reduction initiative of ~$10 billion necessary for Intel to ultimately challenge its foundry and fabless peers from a margin and return perspective, the analyst does not consider it sufficient for a sustained recovery in the company’s competitive position.

Hari continues to be cautious about the name. He awaits signs of wallet share stabilization in Data Center computing and material progress in the company’s external Foundry strategy before potentially becoming more constructive about the stock.

Intel’s notebook CPU revenue increased 15% year-on-year to $4.5 billion due to improved inventory levels at Intel’s customers and ASPs driven by the ramp of Intel 4-based products. Given muted end consumption and signs of some OEMs digesting component inventory in the near term, Hari expects notebook CPU unit growth on a YoY basis to decelerate in the third quarter.

Desktop CPU revenue increased 7% year over year to $2.5 billion, driven primarily by an increase in volume. Hari expects desktop CPU unit growth to decelerate in the third quarter due to soft near-term demand trends.  

Hari estimated that Intel’s second-quarter server CPU revenue decreased 4% year over year. The company reported a 23% increase in ASPs. Following results announcements from both Intel and Advanced Micro Devices, Inc AMD, Hari noted AMD gained a share in the Server CPU market in the second quarter.

Hari projected fiscal 2024 revenue and EPS of $52.87 billion and $(0.50), respectively.

Investors can gain exposure to Intel through Vanguard Information Tech ETF VGT and Vanguard Value ETF VTV

Price Action: INTC shares traded lower by 6.08% at $20.18 at last check Monday.

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