In a twist that is downright unfathomable, chip stock Intel (INTC) took it on the chin today as Fitch Ratings lowered the company’s credit rating. Despite this, investors piled in with a fervor not seen in recent memory, sending shares blasting up around 4% in Tuesday afternoon’s trading.
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The new word from Fitch is generally negative, reports noted, with a downgrade in long-term issuer default rating and senior unsecured ratings, dropped from BBB+ to BBB. However, Fitch did leave the short-term IDR and commercial paper rating alone, still at F2. These ratings changes, reports noted, represent a “…more challenging demand environment than previously anticipated, which is constraining profitability growth…” at Intel.
Further, Fitch analysts pointed out that “…credit metrics remain weak, and will require both stronger end markets and successful product ramps, along with net debt reduction over the next 12-24 months, to return EBITDA leverage to levels consistent with the ratings.” Fitch did have some positive things to say, particularly about how Intel has changed its foundry strategy, but even then, there is still significant risk.
Speaking of That Foundry Strategy
But that foundry issue is coming back to haunt Intel, reports note, as there are some issues with the 18A process. Some reports have suggested it may not have long to live anyway, but apparently Intel is going with it, at least for now. And what Intel is finding is not exactly welcome news either.
Reports noted that Intel’s upcoming Panther Lake chips are seeing “three times too many defects” than they should. This news comes alongside earlier reports that suggest the 18A process is having trouble keeping up on the volume end of things as well. And with a planned launch on Panther Lake still set for the fourth quarter, this is bad news in pretty much every sense. Intel needs the Panther Lake launch to go smoothly, especially if it wants any chance at reaching those “successful product ramps” that Fitch referenced earlier.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 25 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 1.66% loss in its share price over the past year, the average INTC price target of $22.25 per share implies 9.96% upside potential.
