Intel (NASDAQ:INTC) stock has been on a strong run, up 84% so far this year, as a steady stream of developments reshapes how investors view the company’s trajectory. The latest boost came last week, when Intel revealed it will serve as the primary foundry partner for Elon Musk’s Terafab project – reinforcing its ambitions in advanced manufacturing.
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The announcement adds to a growing list of wins under CEO Lip-Bu Tan, whose tenure has already included a high-profile agreement with Nvidia last fall. Over the past year, Tan has worked to reposition Intel’s business, with a clear emphasis on expanding its foundry capabilities and attracting external customers.
Recent reports indicate Intel has been in talks with companies such as Amazon and Alphabet regarding its advanced packaging services, reinforcing the idea that third-party demand could play a meaningful role in its next phase of growth.
Still, there is a degree of caution beneath the surface when it comes to the stock. While Lip-Bu Tan’s execution has drawn praise, investor Bashar Issa notes that the stock’s outsized gains over the past year leave less room for error, with expectations already running high.
Furthermore, Issa argues that Intel’s Foundry is a key area of concern, citing a track record of delays and manufacturing hiccups. The investor believes this could make fabless companies hesitant to commit to Intel, particularly given its lag behind Taiwan Semiconductor Manufacturing Company in fabrication capabilities.
“Intel has an uphill battle ahead as it embarks on a mission to improve its manufacturing and fabrication processes,” Issa adds.
The investor also doesn’t think the Terafab deal automatically moves the needle. He notes that both Tesla and Intel have had issues making chips in the past (Tesla previously axed its D1 chip program), creating the possibility that the joint venture could either exacerbate these troubles or provide a pathway for Intel to redeem itself.
In that vein, Issa isn’t blind to the bull case. For instance, he suggests that Intel could increase its share of the data center market while also expanding further into the world of generative AI. And yet, the investor argues that these assumptions remain hypothetical, while the company’s price-to-earnings multiple of 35x “isn’t particularly undervalued.”
That leaves Issa with the feeling that there are better risk-reward profiles available. The investor is therefore assigning INTC a Hold (i.e., Neutral) rating. (To watch Issa’s track record, click here)
That’s mostly where Wall Street finds itself as well. Its 24 Holds far outweigh 6 Buys and 4 Sells, which combine for a consensus Hold rating. Its 12-month average price target of $53.72 points to losses of approaching 22%. (See INTC stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.