Intel's Foundry Model Webinar Disappoints Investors - It Trails Nvidia, TSMC and Samsung, Analysts Say

Intel Corp INTC analysts re-rate the stock after attending its foundry model investor webinar and re[ports of separation of its foundry separation business.

Needham analyst Quinn Bolton reiterates Intel with a Buy and a $36 price target.

Intel elaborated on its Internal Foundry Model, under which the company will provide separate P&Ls for its manufacturing and design groups beginning in C1Q24. 

On the positive side, Intel believes the IFM will drive $4 billion -$5 billion in annual cost savings over time, which will be a crucial enabler of the previously stated $8 billion -$10 billion in total cost savings by 2025, and provide better transparency internally, to investors and customers. 

Rosenblatt analyst Hans Mosesmann reiterates Intel with a Sell and a $17 price target.

Intel's foundry model investor webinar was informational and helpful, but it seems to have disappointed investors for some reason. It's as if Nvidia Corp NVDA will stand now for leading-edge technology from Intel Foundry Services, which is years away from being a suitable competitive solution to Taiwan Semiconductor Manufacturing Company Ltd TSM and Samsung Electronics Co, Ltd SSNLF.

The analyst expects U.S. and European governments to provide helpful "nudges" for semi-players to engage with Intel.

He views Intel's strategy as a rather tall order and not a given in a market dynamic that is accelerating due to AI dynamics. However, the analyst likes the transparency of the newly proposed model. It's all about execution now.

Mizuho analyst Vijay Rakesh reiterates Intel with a Neutral and a $30 price target.

The internal foundry revenue will reach ~$20 billion by 2024E. It is on track for $3 billion of cost savings in 2023E, with $2 billion of operating expenses and $1 billion of cost of goods sold, and its 60% gross margin and 40% operating margin targets are intact, despite high costs associated with foundry ramp. 

While INTC reiterated a positive product roadmap with the ramp of 5 nodes in 4 years, Rakesh believes PC remains slow, while Data Center and Conventional server markets see a flattish second half, below consensus expectations.

He sees INTC PC share gains offset by Advanced Micro Devices, Inc AMD server challenges, with potential for Sapphire Rapids Enterprise tailwinds in 2H23E. 

Benchmark analyst Cody Acree reiterates Intel with a Buy and a $39 price target.

Acree is encouraged by the company's increased transparency and its new reporting structure on further separation of its foundry manufacturing business, he believes Intel is still a few years away from being a meaningful source of external foundry supply, with its first 18A customer not likely announced until later in the second half of this year, with a volume ramp not expected until late 2025 or 2026. 

Price Action: INTC shares are trading lower by 1.38% to $32.44 on the last check Thursday.

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