BofA Downgrades Intel to Underperform, $34 Price Target

BofA Securities analyst Vivek Arya downgraded Intel (NASDAQ: INTC) from Neutral to Underperform with a price target of $34.

“We downgrade INTC to Underperform from Neutral while maintaining ests. and $34 PO.

In our view the recent $80bn jump in INTC’s market cap more than reflects its improved balance sheet and (external) foundry potential.

Meanwhile INTC’s competitive outlook remains challenged with no discernible AI portfolio/strategy, uncompetitive server CPU, and less flexibility now vs. before in divesting loss-making manufacturing, in our view.

We fundamentally disagree with valuation methods that rely on sum-of-parts with PE applied to INTC Products and P/S to INTC’s loss-making “Foundry”.

The term “foundry” is a misnomer since it implies great future potential to attract external customers which is unjustified.

INTC relies on TSMC for ~30% of its manufacturing, with uncertainty about cost/yield of its upcoming 18A process, and future 14A process.

Second, we believe US gov’t intervention requires INTC to remain committed to manufacturing, regardless of its profitability.

All-in, we believe INTC valuation should be done on PE or EBITDA on earnings generated by the entire company since there is no catalyst to split.”

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