What Do Analysts Think About Intel After Tower Semiconductor Deal

  • Analysts had mixed views on Intel Corp INTC after yesterday's reports about Intel nearing a deal to acquire Tower Semiconductor Ltd TSEM for $6 billion. 
  • Northland analyst Gus Richard said such a deal would "make a lot of sense" and be a good one for Intel shareholders based on his estimate that it would cost $13 billion -$15 billion to replace the Tower foundry network.
  • Intel "failed the last time it tried to become a foundry," and it needs to learn how to work with foundry customers, develop process design kits, expand its IP portfolio, and develop a broader breadth of process technology. Tower "possesses all of these capabilities," argues Richard. 
  • He kept an Outperform rating and $62 price target (30.3% upside) on Intel before it confirmed to acquire Tower for $53 per share in cash, representing a total enterprise value of $5.4 billion.
  • Intel's January notebook shipments were down 24% month-over-month, well below Citi's expectation of down 16%, mainly due to component supply constraints, Citi analyst Christopher Danely tells investors in a research note. 
  • The analyst sees this as "another red flag" after Intel stated it saw an inventory correction in the notebook end market during its last earnings call. 
  • He believes PC sales "will cool off" in 2022 due to a reversion to the mean after two straight years of double-digit growth. 
  • Danely reiterated a Neutral rating on the shares with a $55 price target (15.6% upside).
  • Price Action: INTC shares traded lower by 0.19% at $48.35 in the premarket on the last check Wednesday.
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