Intel Stock Has More Than Tripled – But Bank of America Says Don’t Get Too Excited

Someone appears to have leaned on the “stock goes up” button and forgotten to let go. At least that’s how things look for Intel (NASDAQ:INTC) right now. The chip giant’s shares have gone absolutely parabolic, more than tripling since late March.

The latest jolt higher came after a report from The Wall Street Journal revealed that Apple and Intel have reached a preliminary agreement for Intel to manufacture certain chips used in Apple devices, following more than a year of negotiations.

While the discussions are still said to be ongoing, Bank of America analyst Vivek Arya believes the development fits with Intel Foundry’s earlier comments about working with customers interested in producing ARM-based processors, including Apple-designed SoCs.

And if the partnership eventually grows into something substantial, the financial implications could be enormous. Apple currently makes up about 17% of TSMC’s customer base, while TSMC generates nearly $160 billion in annual revenue. Based on that framework, Arya estimates the opportunity for Intel could eventually represent a $35 billion to $40 billion-plus addressable market. Capturing even a 25% slice of that business could potentially translate into more than $10 billion in annual revenue over time.

Still, even if a formal agreement were announced immediately, Arya thinks the process would likely require another two to three years for capex expansion, qualification, tapeout, and related preparations. Management has repeatedly emphasized that bringing on additional wafer customers would require incremental capex rather than a ‘spend first, customers will come’ strategy, with meaningful production volumes potentially not arriving until 2028 or later. Additionally, the initial ramp-up of these fabs would likely pressure gross margins due to depreciation, ramp-related expenses, and lower yields, while management’s target of foundry operating margin breakeven by 2027 could slip by another one to two years.

For now, Arya is not baking a potential Apple agreement into his Intel model until there is greater clarity surrounding both the terms and the probability of completion. Nevertheless, the 5-star analyst acknowledges the sheer scale of the possible upside. Combined with a higher long-term server CPU market outlook – now projected at around $120 billion by 2030 versus a prior estimate closer to $80 billion – Arya raised his price target on Intel shares to $96 from $56.

That said, the new target still sits about 23% below Intel’s current share price, helping explain why Arya assigned the stock an Underperform (i.e., Sell) rating. (To watch Arya’s track record, click here)

Amongst Arya’s colleagues, 2 join him in the bear camp, while an additional 23 Holds and 11 Buys all add up to a Hold (i.e., Neutral) consensus rating. However, the $81.41 average price target sits 37% below the current share price. As such, keep an eye out for further analyst model adjustments shortly. (See Intel stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.