Chip stock Intel (INTC) hit a bit of a roadblock today as UBS analysts took aim at the company and realized that things were not going quite as well as the recent all-time intraday high might suggest. But investors were not daunted, and gave Intel a modest boost in share prices regardless in Monday afternoon’s trading.
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UBS analyst Timothy Arcuri—who has a five-star rating on TipRanks—is not so sure that Intel’s current position justifies the hefty run-up in its share price of late. Some run-up, certainly—that much was clear when Arcuri hiked his price target from $65 to $83—but not all of it. That explains why Arcuri left the Neutral rating in place.
Arcuri noted, “The manufacturing narrative is playing out about as we expected, but we have underestimated how much the market was willing to overlook a lack of earnings power.” There are, after all, several competitors for Intel’s market right now. And while the huge artificial intelligence (AI) market is pivoting in Intel’s favor as it goes from GPUs to CPUs, the end result is that Intel may not have the market quite so cornered.
Selling Scrap
Intel also made an unexpected revelation, noting that it was selling several processors that would not normally be sold just to try and meet demand. Intel noted that it was willing to sell chips that were “…what may have been scrap or low-expectation output” in a bid to simply keep up with the flow. This means extra revenue for Intel, but a potentially Pyrrhic victory at that.
While some formerly scrap CPUs are finding new life as finished product, this may damage Intel going forward. Customers may not like that the scrap Intel sold turned out to be actual scrap, and thus of a lower quality. But given that these are unique circumstances, Intel might well be forgiven for simply trying to meet demand. Only time will tell how the market reacts.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on 10 Buys, 23 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 302.44% rally in its share price over the past year, the average INTC price target of $76.90 per share implies 7.59% downside risk.
