Last week dealt a significant blow to Intel (NASDAQ: INTC) as the company’s shares plummeted by 8% following the release of separate financials for its semiconductor manufacturing segment, known as Intel Foundry. This marked the first time Intel had disclosed specific figures for this segment, shedding light on its performance and prospects.
Unfortunately, the numbers were far from encouraging. Intel Foundry reported a staggering loss of $7 billion in 2023, widening from the previous year’s loss of $5.2 billion. Additionally, sales dipped from $27.5 billion in 2022 to $18.9 billion in 2023, painting a concerning picture for the segment’s financial health.
To address concerns and provide insight into its new reporting segment, Intel hosted a webinar, during which it outlined a timeline for Intel Foundry’s Operating Margin to reach breakeven. However, Rosenblatt’s Hans Mosesmann, a highly regarded analyst on Wall Street, noted that while the company’s transparency was commendable, the outlook for Intel Foundry was less than favorable. Mosesmann highlighted that Intel anticipates the Operating Margin to break even around 2027, with a target of 30% by the end of 2030.
Despite acknowledging Intel’s efforts, Mosesmann expressed skepticism about the company’s strategy and execution, particularly in the realm of AI semiconductor technology. He suggested that Intel may struggle to capitalize on the current semiconductor AI cycle and questioned the sustainability of its strategy, which could require significant subsidies for an extended period.
Mosesmann’s sentiment toward Intel remains bearish, as he maintains a Sell rating on the stock with a Street-low price target of $17, implying a downside potential of 58% from current levels. While a few other analysts share his bearish outlook, the broader consensus on Wall Street rates Intel as a Hold, with some forecasting a potential upside of 26% over the next year.
In summary, Intel faces significant challenges as it navigates the evolving semiconductor landscape, particularly in the AI segment. While some investors may see potential for growth from a low point, others remain cautious, citing concerns about the duration of the downturn. With diverging opinions among analysts, investors should carefully evaluate Intel’s prospects and conduct thorough research before making investment decisions.