UBS Raises Intel Price Target to $52

UBS analyst Timothy Arcuri raised the price target on Intel (NASDAQ: INTC) to $52.00 (from $49.00) while maintaining a Neutral rating.

“Despite Intel having already telegraphed severe supply constraints in CQ1, many investors were hoping it might still benefit from the big uptick we are seeing in server CPU demand.

This was not the case; INTC guided to the low end of normal seasonal and below most bogeys.

It makes sense to us that INTC would struggle to meet demand upside because the vast majority of its server CPU shipments are still Sapphire/Emerald Rapids – which are on Intel 7 with structural yield challenges.

Supply will improve from here, but the structural disadvantages of Intel’s roadmap versus AMD are still worsening, so INTC risks missing a lot of the server market’s AI-related upside.

This all reads very positively for AMD.

The roadmap in PC is definitely better, but this does not help much because the PC market is likely to be down this year – potentially quite a bit – as high memory prices destroy some PC demand.

We remain constructive on the story in foundry and with the release of the 14A production design kit (PDK 1.0) late this year, we see INTC possibly signing deals with one or more of NVDA, AAPL (M-Series), and maybe Amazon and a high-end consumer product.

This will likely be a positive catalyst and we are tweaking our PT up just slightly in recognition, but we still struggle with the earnings power here – especially as INTC is giving up about half of the incremental profits to Apollo and Brookfield due to the financing agreements signed several years back.

Moving to new products on its 18A process will help foundry margins, but hurt product margins, so we think the net effect is only modestly positive.

Ultimately, we quite like the story but the stock has gone up so much and the bull case to support further upside from here is 3-4 years away, in our view.

So we land in about the same place as before with a slight PT increase from $49 to $52 based on SOTP and a little more confidence that external foundry deals are coming late this year.”

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