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Intel Corp. shares fell Friday after analysts downgraded the stock following the chip maker’s earnings report where they tried to assure investors that lower margins would bounce back in a few years as the company tries to right its ship.
Intel
INTC,
shares dropped 10% in early morning trading, touching an intraday low of $49.45. The last time the stock dropped below $50 was back on Jan. 5.
Late Thursday, Intel Chief Executive Pat Gelsinger tried to assure concerned analysts that gross margins would stay “comfortably above 50%” as the chip maker tries to reposition the business to return to its former glory by boosting its 2022 investment in new manufacturing capacity to about $25 billion to $28 billion, nearly double its previous range.
“We are repositioning Intel for growth to be a long-term growth company,” Gelsinger said. “Near-term, we could have chosen a more conservative route with modestly better financials, but instead the board, the management team — and this is why I came back to the company — choosing to invest to maximize the long-range business that we have.”
Earlier in the year, Intel was rumored to be interested in acquiring silicon-wafer manufacturing company GlobalFoundries Inc.
GFS,
but that company later opted to pursue an initial public offering.
Mizuho analyst Vijay Rakash downgraded Intel to a neutral rating from a previous buy and cut his price target to $55 from $70, noting that Intel was “losing focus.”
“We believe the pivot could become a capital drag, as it is difficult to both win in the foundry market and maintain attractive margins,” Rakesh said. That could also be more advantageous to smaller rival Advanced Micro Devices Inc.
AMD,
he said.
“We now believe splitting focus with building foundry capacity and accelerating five node transitions by 2025 could be a challenge and potentially widen the gap versus AMD,” Rakesh said. “In addition, if the performance gap to AMD increases further, INTC could have to price-discount more aggressively.”
Of the 41 analysts who cover Intel, 12 have buy ratings, 19 have hold ratings, and 10 have sell ratings, according to FactSet. Of those, 16 cut their price targets, driving the average down to $56.04 from a previous $61.83.
