Skip to main content

Market Overview

Intel Business Model 'Structurally Misaligned With Industry Direction,' Analyst Says

Share:
Intel Business Model 'Structurally Misaligned With Industry Direction,' Analyst Says

Intel Corporation (NASDAQ: INTC) is facing a tough challenge as its business model is said to be "structurally misaligned with industry direction," according to a bearish note issued Sunday by Bank of America Global Securities.

The BofA Analyst: Vivek Arya maintained an Underperform rating on the stock, with a $25 price target.

The analyst argues that Intel's insistence on a capex-intensive integrated design/manufacturing model (IDM) is forcing it to compete against rivals that are more focused on just manufacturing or just design.

See Also: S&P 500 Rises Following Bostic's Comments, Market Volatility Drops Further

While Intel has enhanced its IDM model and introduced separate reporting of its internal foundry service (IFS), the Santa Clara, California-based company's sub-scale IFS operation has less than 1% global market share, Vivek said, making it too small to provide a useful internal cost benchmark or a reliable indication of long-term external commitment.

Further, the analyst notes that Intel's current IDM structure raises barriers for its design teams to rely too much on external foundries, while making it harder for IFS to engage with external customers, risking or sub-optimizing current relationships with other foundries such as Taiwan Semiconductor Mfg. Co. Ltd (NYSE: TSM) and Samsung.

Despite the challenges, BofA does acknowledge some positive factors.

A recovering PC market and the potential reopening of China in the second half of the year could provide some relief, as could Intel's aggressive cost-cutting measures and benefits from U.S./EU Chips Acts.

Additionally, the company's ability to close the manufacturing gap with TSMC and gain IFS share by leveraging U.S. manufacturing could be underappreciated.

As of now, Intel's stock has come close to testing its book value of $24.52 per share for the first time, indicating a value-reducing company strategy, Vivek said.

Price action: Shares of Intel are trading 0.23% higher in Monday’s premarket session to $26.46, according to data from Benzinga Pro.

Image: Wikimedia

Latest Ratings for INTC

DateFirmActionFromTo
Mar 2022Morgan StanleyDowngradesEqual-WeightUnderweight
Feb 2022Raymond JamesUpgradesUnderperformMarket Perform
Feb 2022BMO CapitalMaintainsMarket Perform

View More Analyst Ratings for INTC

View the Latest Analyst Ratings

 

Related Articles (INTC)

View Comments and Join the Discussion!

Posted-In: Analyst Color Large Cap News Global Markets Analyst Ratings Tech Trading Ideas

Latest Ratings

StockFirmActionPT
SEDGB of A SecuritiesMaintains411.0
PTLOPiper SandlerMaintains28.0
AOUTLake StreetMaintains26.0
RAPTPiper SandlerMaintains52.0
OCXLake StreetMaintains6.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com