Intel climbs as Wall St cheers early signs of recovery

Intel Corp (INTC.O) shares rose nearly 6% as the once-dominant chipmaker's quarterly print indicated "baby step progress" in efforts to turn around its business after ceding market share to rivals and struggling with all-time low margins.

At least 13 brokerages raised their target price on the stock that has under-performed rivals this year, encouraged by CEO Pat Gelsinger's remarks the PC market - on which Intel built its reputation - was stabilizing after multiple quarters of decline.

"While the future pace of the sector's recovery is uncertain, we do believe that Intel has reached a revenue, gross margin, and profit trough through this first half of 2023," said Benchmark analyst Cody Acree, upgrading the stock to "buy".

Intel on Thursday projected adjusted gross margins will climb above 40% in the second half, and said it had ramped up shipments of a key data center chip after a more than one-year-long delay had allowed rivals to take its market share.

TD Cowen analysts said the company "was not out of the woods yet but this was a starting point."

Intel's market capitalization is set to rise by nearly $8 billion to more than $130 billion, if premarket gains hold. But a tough few years mean that its valuation widely trails that of rival Nvidia Corp (NVDA.O) and Taiwan's TSMC (2330.TW), which are valued at about $672 billion and $420 billion, respectively.

The company's shares were up 5.8% at $31.59 in premarket trading.

Some analysts, however, said Intel's predicted recovery could run into hurdles.

"We see gross margin pressured for the foreseeable future reflecting aggressive process and new product spend as well as IFS (Intel Foundry Services) investment," Oppenheimer said.

Intel posted its biggest quarterly loss in the first quarter as it ramped up production and investments in manufacturing plants.

"Cash remains problematic," said Rosenblatt Securities, adding that "capacity investments really do not solve in a monumental effort to catch up to TSMC and Samsung; as if dealing with AMD, Broadcom and Nvidia as a group were not enough."

Reuters