This post was originally published on this site
Intel Corp.’s new chief executive is feeling ambitious, and now analysts are wondering whether the company can follow through on its big plans.
Chief Executive Pat Gelsinger recently took over the top job at Intel
INTC,
following a period of setbacks for the chip giant, and he addressed investors Tuesday to lay out what one analyst described as a “very ambitious plan” for its future strategy. His comments indicated that Intel intends to remain an integrated device manufacturer (IDM) while also doing some outsourcing and launching a new foundry services business.
“It’s all about execution here,” wrote Cowen & Co. analyst Matthew Ramsay. “Given missteps and delays over the last seven years this is a 100% a show-me story. Hopefully the massive outsourcing conversations cease, but Intel still needs to prove a path back to competitiveness with TSMC
TSM,
”
Ramsay raised his price target on Intel’s stock to $81 from $80 while reiterating an outperform rating on the stock.
Opinion: Intel’s new CEO makes bold moves in manufacturing
Intel shares rose 0.1% in Wednesday morning trading, though they were up as much as 6.2% earlier in the session.
Bernstein analyst Stacy Rasgon commented that “one can’t fault new CEO Pat Gelsinger for a lack of vision” and described Gelsinger’s approach as an “all of the above” strategy, though he still has a bearish view on the stock.
“The bull case here remains ‘cheap hope’ and we suppose investors can still have some reason to hope, at least for now; at a minimum Pat exudes an enthusiasm and confidence that has been sorely lacking at Intel for some time,” Rasgon wrote. “At the same time however, executing on this plan is going to be very challenging, and we suspect the economics during the transition are going to get uglier; we will see how well appetite holds up as the truer picture emerges.”
He rates Intel’s stock at underperform with a $43 target price.
Evercore ISI analyst C.J. Muse wrote that “it’s hard not to see shares continuing to grind higher” given that “the burden of proof around Intel negativity appears to have shifted to the bear camp” and Intel is expected to benefit from government assistance.
The “clear winners” from Intel’s news, however, are the chip-equipment companies, in Muse’s view, since these will benefit from Intel’s plans to boost its spending.
“While the transformation at Intel will take many years to fully unfold, what is crystal clear to us is that the uplift in spending by Intel along with capex discussions elsewhere from leading foundry players suggest some upside to CY21 WFE [wafer-fab equipment] (though equipment shortages will limit upside to some degree) and then a clear picture to growth in CY22–is $90 billion or more now on the table?”
Muse has an in-line rating on Intel’s stock and boosted his price target to $75 from $68. He ranks ASML Holding NV
ASML,
as his top chip-equipment pick, followed by Applied Materials Inc.
AMAT,
Lam Research Corp.
LRCX,
and KLA Corp.
KLAC,
Applied Materials shares shot up 6.9% in Wednesday trading, to pace the S&P 500 index’s
SPX,
gainers. ASML shares are up 5.7%, while Lam Research shares are up 3.9%, and KLA shares are up 4.7%.
Intel’s stock has gained 35% over the past three months, as the Dow Jones Industrial Average
DJIA,
has risen 8.5%.
