8 Intel Analysts On Q4 Report: Why Some See Difficult Years Ahead For Chipmaker

Intel Corporation INTC shares were trading lower in the wake of the chip giant's better-than-expected fourth-quarter results, which were reportedly issued a few minutes early Thursday after Intel's website was hacked. 

The Intel Analysts: BofA Securities analyst reiterated an Underperform rating on Intel with a $58 price target.

Raymond James analyst Chris Caso reiterated a Market Perform rating.

Wedbush analyst Matt Bryson maintained an Underperform rating and increased the price target from $48 to $53.

Needham analyst Quinn Bolton maintained a Buy rating and $70 price target.

Rosenblatt Securities analyst Hans Mosesmann reiterated a Sell rating and $40 price target.

RBC Capital Markets analyst Mitch Steves maintained an Underperform rating and increased the price target from $40 to $47.

UBS analyst Timothy Arcuri maintained a Buy rating and increased the price target from $71 to $75.

KeyBanc Capital Markets analyst Weston Twigg maintained an Overweight rating and hiked the price target from $82 to $86.

BofA Projects Stagnating EPS From Intel: Intel's pro forma EPS isn't likely to make much progress for the next two years or so, due to competitive risks impacting the top line; cost pressures arising from the decision to maintain internal manufacturing; and investment needs for growth activities, Arya said in a note.

The fourth-quarter revenue beat and better-than-expected first-quarter sales guidance reflected the boost from work-from-home/PC demand, the analyst said.

This boost will likely dissipate in the second half of 2021, he added.

"Meanwhile big fix on 7nm manufacturing is unlikely before 2023, and even then INTC will continue to depend partially on foundry (which will be 1+ node ahead, or 3nm, by that time)." 

Intel At Disadvantage, RayJay Says : The problem with Intel's decision to stick to internal manufacturing for a majority of its 2023 products is that the company will still be a node behind Taiwan Semiconductor Mfg. Co. Ltd. TSM, even if the company is executing on 7nm node technology, Caso said in a note. 

"And we don't think INTC can deliver leadership products without leadership in transistors because it has never been done before," the analyst said.

This would keep Intel behind the industry for four more years, he said. 

Investors will likely require much more convincing before becoming bullish on the stock if retaining internal manufacturing is the strategy, according to Raymond James. 

Related Link: 4 Intel Analysts On What New CEO Means For Chipmaker's Market Share, Turnaround

Wedbush On What's Good, Bad, Mixed In Intel's Q4: The PC results were particularly strong, with a 33% year-over-year increase in volume and the positive impact to revenue and margins coming in above expectations, Bryson said in a note.

A portion of the sequential growth is attributable to a broad rebound in autos, the analyst said. 

On the flip side, the company guided to a sequentially flat gross margin for the first quarter, he said. 

Incoming CEO Pat Gelsinger's suggestion that core Intel products will be manufactured internally could be both a positive and a negative, Bryson said.

"While we view a functioning IDM model as the best possible future outcome for Intel; this choice ultimately will require a more lengthy recovery than shifting to an outsourced foundry."

Needham Has Confidence In New CEO: Intel's fourth-quarter results and first-quarter guidance reflected an across-the-board beat, Bolton said in a note.

The company will provide its 2021 outlook and a more detailed update on its 7nm progress and outsourcing plans after the new CEO takes over next month, the analyst said. 

PC demand is expected to be more first half-weighted than normal, while data center demand is expected to be second half-weighted due to COVID-19 impacts and cloud digestion in the first half, he said, citing the company.

In 2021, Intel will likely protect its share in DCG from Advanced Micro Devices, Inc. AMD by competing more aggressively on price, Bolton said. 

"With new CEO Pat Gelsinger coming onboard, we believe Intel will be able to identify weaknesses in its processor roadmap and reestablish its processor performance leadership."

Rosenblatt Says Intel's Challenges Will Take Years To Fix: Intel's 7nm transition looks to be delayed to mid-2023 for clients and later on for servers, suggesting when it occurs it would be up against 3nm or below from leading foundries, Mosesmann said in a note.

Intel will need more disruptive change in architectural roadmaps and has to be less adamant on an IDM-centric model to be effective, the analyst said.

"Nothing in last night's earnings call changes our opinion on Intel, the company's challenges, or the many years it will take to fix them."

RBC's 4 Key Takeaways On Intel: Intel's decision to rely mainly on in-house manufacturing through 2023 suggests it will continue to lose share to rivals in the time frame, Steves said in a note.

The near-term results will be positive due to the beginning of a larger semiconductor cycle, the analyst said.

The first-quarter guidance is conservative, especially as a new CEO will be at the helm, he said.

An improving enterprise demand environment should favor near-term fundamentals as a rising macro environment generates notable upside for the chip sector broadly, Steves said.

UBS Likes Setup, Says Intel A Top Semi Idea For 2021: Street estimates are still biased higher, as the first quarter guidance is only in line with seasonal despite strong end-market trends, Arcuri said in a note. 

Following the new CEO appointment, investors appear more than willing to consider potential longer-term transformation and value creation, the analyst said.

Intel should forge more of a technology partnership with key foundries like TSMC rather than a typical "transactional" relationship between fabless and foundry, he said.

This type of partnership could also leverage new U.S. tax credits for onshore manufacturing for further value creation, Arcuri said.  

The analyst said he continues to very much like the setup here, and together with Micron Technology, Inc. MU, Intel remains UBS' top idea in semiconductors for 2021.

INTC Price Action: At last check, Intel shares were down 8.62% Friday at $57.08. 

Related Link: 5 Reasons To Stay Positive On Intel

Photo courtesy of Intel.