Bank of America has reiterated its neutral position on Intel Corp (NASDAQ:INTC, ETR:INL), forecasting a mixed performance for the vertically integrated chipmaker in the upcoming quarters.
BoA expects Intel's fourth-quarter results to align with or modestly surpass expectations, estimating sales at approximately $15.1 billion and a gross margin of 46.5%.
However, the outlook for the following quarter appears less optimistic, with a projected miss on sales, anticipated to be around $13.5 billion, marking an 11% quarter-over-quarter decrease.
This downturn is partly attributed to the revised outlook on autonomous driving subsidiary Mobileye, alongside weak PC seasonality and underwhelming networking and enterprise trends.
For the full year 2024, Bank of America has modestly lowered its sales outlook for Intel, now estimated at $58.5 billion, an 8.5% year-over-year increase but still below the consensus figure of $61.3 billion.
The adjusted earnings per share (EPS) for 2024 are set at $1.48, marginally tweaked but remaining under the consensus estimate of $1.82.
According to BoA, Intel's future earnings growth lies in its gross margin expansion, noting that Intel has set a long-term target of 60%, which would revert the group back to historical trends in the mid-2010s.
But “many things have to go right” for this to happen, said analysts, as those margins were achieved in a growing PC and data center market when Intel had 95% CPU value share versus just 71% today.
Another significant aspect of Intel's valuation is its progress in the semiconductor foundry sector, which is dominated by Taiwan Semiconductor Manufacturing Company, and to a lesser extent, Samsung Corporation.
There are reservations about Intel achieving more than a low single-digit foundry share due to TSMC’s and Samsung’s global supremacy, particularly given the duopolists’ close relationships with Nvidia, AMD and other major chip designers.
Intel also needs to fend off fellow CPU designer Arm Holdings PLC (NASDAQ:ARM)’s encroachment into the PC sector, even though its wheelhouse remains firmly planted in the smartphone sector for now.