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[Discover exclusive valuation insights with InvestingPro, which indicates Intel is currently undervalued based on its proprietary Fair Value model.][Discover exclusive valuation insights with InvestingPro, which indicates Intel is currently undervalued based on its proprietary Fair Value model.]In light of these developments, Arya has revised downward the projected pro forma EPS for CY25/26 by 36% and 33%, respectively, to 56 cents and 91 cents. The new price objective of $19 is based on a 21 times CY26E P/E ratio, which aligns with the SOX index. The adjustment reflects the increased certainty regarding Intel’s funding from the CHIPS Act, as well as the potential for continued restructuring under new management. With analyst targets ranging from $19 to $31 and a consensus recommendation of 2.96, investors should note that the company’s next earnings report is scheduled for April 24, 2025. With analyst targets ranging from $19 to $31 and a consensus recommendation of 2.96, investors should note that the company’s next earnings report is scheduled for April 24, 2025.
Intel is facing challenges with weaker sales forecasted for Q1 and persistently high input costs, particularly due to an increase in PC production outsourced to TSMC. This situation is expected to push gross margins down to 36%, a potentially record low and 330 basis points below the consensus of 39.3% - a significant drop from the current trailing twelve-month gross margin of 32.66%. Arya highlighted that Intel did not provide a full-year guide for CY25 but did indicate ongoing gross margin headwinds due to aggressive pricing aimed at retaining market share, which could negatively impact AMD (NASDAQ:AMD). The company’s financial struggles are evident in its negative return on invested capital of -3% and concerning free cash flow yield.
Additionally, the company has delayed the release of its Clearwater Forest server CPU by more than six months, now expected in the first half of 2026. However, Intel remains on track with its 18A roadmap. Capital expenditures have been revised downward to $20 billion from the previously estimated $21.5 billion, which is seen as a positive development, better than some had feared. The company also plans to continue partnerships with external partners, which is beneficial for EDA vendors such as Synopsys (NASDAQ:SNPS) and Cadence Design Systems (NASDAQ:CDNS).
In light of these developments, Arya has revised downward the projected pro forma EPS for CY25/26 by 36% and 33%, respectively, to 56 cents and 91 cents. The new price objective of $19 is based on a 21 times CY26E P/E ratio, which aligns with the SOX index. The adjustment reflects the increased certainty regarding Intel’s funding from the CHIPS Act, as well as the potential for continued restructuring under new management.
In other recent news, Intel Corporation (NASDAQ:INTC)’s earnings for the fourth fiscal quarter of 2024 met expectations with reported revenue of $13.8 billion and Non-GAAP EPS of $0.12. However, projections for the first fiscal quarter of 2025 indicate a slight dip, with expected revenue at $13.0 billion and Non-GAAP EPS of $0.17. Amid these financial developments, Intel announced strategic collaborations such as a pilot production line with United Microelectronics Corporation in Arizona and the construction of a new manufacturing complex in Ohio, dubbed the Silicon Heartland. The company also plans to spin off its venture capital arm, Intel Capital, into an independent fund.
Several analyst firms, including Needham, Bernstein, Mizuho (NYSE:MFG) Securities, Stifel, and Baird, have revised their price targets for Intel. While maintaining their ratings, these firms have adjusted their targets in response to Intel’s recent financial guidance. Furthermore, Global Equities Research has encouraged clients to capitalize on the current weakness in Intel’s stock, citing promising prospects for the company’s AI initiatives. These are among the recent developments impacting Intel’s strategic direction and operational efficiency.
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