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4 Intel analysts on the ‘triggered’ event, the risks of the chip maker’s founding plans
At Intel Corporation’s “Intel Unleashed” (NASDAQ: INTC) event on Tuesday, CEO Pat Gelsinger shared his vision for IDM 2.0, the company’s integrated device manufacturing model. Here’s what the street has to say. Intel Analysts: BofA Securities analyst, Vivek Arya, reiterated an inferior performance rating for Intel with a $ 62 price target. Analyst Chris Caso, an analyst at Raymond James, maintained a Market Perform rating. Needham analyst Quinn Bolton maintained the Buy rating and raised the target price from $ 70 to $ 74. Rosenblatt Securities analyst Hans Mosesmann reiterated a sales rating and a target price of $ 40. Intel is increasing the risk of execution, says Rosenblatt: Fixing Intel’s structural problems is a difficult task, and adding another dimension to the risk of execution in the form of a foundry battle with TSMC and Samsung has made the challenge incredibly complex, said Mosesmann on a note. “Intel has no experience in foundry services and it should come as no surprise that Intel’s corporate culture is not configured for the services aspect of the foundry business, in our opinion,” said the analyst. Intel indicated that the first quarter of 2021 will exceed the original guidance due to strong demand for notebooks, he said. Even so, the annual performance was “moderate” in relation to the problems of PC mix and the scarcity of the industry, said Mosesmann. The 2021 outlook reflects the weak adoption of new Ice Lake Server CPUs and the delay in increasing the volume of Sapphire Rapids CPUs from the first half of 2022 to the second half, the analyst said. In this one to two year gap, the analyst sees Advanced Micro Devices, Inc. (NASDAQ: AMD) running virtually unopposed in the server space in terms of new deployments. “Ultimately, the Unleashed event was about Intel’s entry into the foundry services business that will take years to establish and commit to the IDM model, which we already knew,” he said. Related link: 4 Intel analysts on what the new CEO means for the chip maker’s market share, turnaround Why BofA is cautious about Intel’s actions: While positive about the confidence and boldness of the new Intel CEO in an opportunity that could be supported by incentives from the U.S. government, BofA is cautious about the chipmaker’s actions, Arya said in a note. There is no evidence that Intel can match or exceed the cutting-edge capacity of foundry leader TSMC, which also plans to build several factories in Arizona that will grow in a similar period of time, the analyst said. The smelter, while driving incremental sales, can dilute gross margins and free cash flow, he said. Intel will have to start from scratch in this new business and balance potential conflicts of interest with customers, Arya said. In addition, Intel is the only semiconductor vendor driving sales, GM and FCF for the 2021 calendar year, falling year on year, despite double-digit growth in the PC market, suggesting that share losses will continue, he said. the analyst. RayJay claims that Intel is at a significant competitive disadvantage: Intel’s recent positive case is that the narrative would be more important than the numbers in the short term, and that ended up with the inventory increase, despite an estimate cut to 2021, said Case. The event did not give the analyst a reason to change his skeptical stance, he said. “Intel seems more committed than ever to cutting-edge in-house manufacturing, which poses risks, despite the credentials of the new CEO.” The Street is likely to be highly skeptical of the recently launched capital-consuming foundry business, Caso said. In addition, customers will approach an Intel smelter with caution, given the disastrous outcome of Intel’s previous smelter contracts, the analyst said. Intel is likely to remain at a significant competitive manufacturing disadvantage for many years, providing plenty of time to lose stake in the meantime, even if the plan is successful, according to Raymond James. Needham says what’s old now is new again: The Intel Unleashed event signaled a return to its roots, Bolton said. At the event, Intel provided a positive update on its 7 nm process and reiterated a plan to build most of its products in-house, while increasing the use of third-party foundries, the analyst said. Intel is increasing its involvement with Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Samsung, GlobalFoundries and United Microelectronics Corporation (NYSE: UMC), he said. The company launched its Intel Foundry Service to address industry capacity constraints and to bring more geographically balanced manufacturing capacity, said Bolton. IFS, the analyst said, will offer manufacturing sites in the US and Europe. Intel plans to target commercial customers, as well as unique opportunities in government and security requirements in the United States, he said. The company also plans to spend $ 20 billion on two new plants in Arizona, said Bolton. These factories will support Intel’s current products as well as its foundry customers, the analyst said. INTC Price Action: At the last check, Intel’s shares traded slightly down to $ 63.43. Related Link: What Intel Investors Should Know About Chipmaker’s Next ‘Triggered’ Event analysts at BenzingaClickW options Investors should know about ChipmakerApple’s future ‘triggered’ event plans to invest .19B in the German chip design unit © 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.