Intel (NASDAQ: INTC) had a robust performance in 2023, but the company has faced significant challenges in 2024, particularly in the highly competitive AI chip market and its foundry business. As a result, Intel’s shares have retreated by 29% year-to-date, prompting questions about the company’s future trajectory. With Intel set to report its Q1 earnings, analysts are divided on whether the results could help improve investor sentiment and turn the tide for the semiconductor giant.
Christopher Rolland, an analyst at Susquehanna, offers insights into Intel’s upcoming earnings report. He anticipates that Intel’s Q1 results and guidance will likely be in line with expectations or slightly weaker. Rolland points to potential strength in client shipments but expresses concerns about weakness in the server segment, driven by anticipation of new product launches in the second half of the year. Additionally, Rolland highlights headwinds from inventory corrections for certain Intel products, including Altera, NEX, and MBLY.
Regarding client shipments, Rolland acknowledges positive signs, with strong Q1 notebook builds and PC sell-through exceeding previous expectations. However, he notes delays in the ramp-up of production for Intel’s new product launches, such as the Raptor Lake refresh and Meteor Lake. Despite the launch of Meteor Lake in December, Rolland’s checks suggest that it only represented a small percentage of Intel’s laptop mix, indicating a slower-than-expected ramp-up.
On the data center and AI (DCAI) side, Rolland’s checks suggest a mixed performance in the first quarter, with improvement seen in March. Intel’s upcoming launch of Sierra Forest Xeon server processors in Q2 could provide a boost, although Rolland acknowledges that Intel’s data center product launches tend to ramp up more slowly compared to the client side. Rolland also notes that AI server GPU purchases may have impacted CPU wallet share, but there are indications of a potential resurgence in traditional server spending later in the year.
In summary, Rolland expects Intel to deliver a relatively in-line to slightly weaker guidance for Q1 but remains cautiously optimistic about a stronger performance in the second half of the year.
Despite Rolland’s caution, Wall Street sentiment on Intel remains mixed, with TipRanks analysts rating the stock as a Hold. While 24 analysts rate it a Hold, 5 recommend a Buy, and 4 issue a Sell. The 12-month average price target for Intel stands at $45.05, representing a potential 27% upside from the current trading price.
In conclusion, Intel’s upcoming earnings report will be closely watched by investors for insights into its performance and future outlook. While uncertainties remain about Intel’s ability to address challenges in the AI chip market and its foundry business, the company’s strategic initiatives and product launches in the coming months could potentially drive a turnaround in its fortunes.