Susquehanna analyst Christopher Rolland argued Intel Corp INTC with neutral and a price target of $42.
The analyst listed key points from Q1 2024 Intel PC-SIGnals notebook CPU share improved by +1.2% sequentially, the highest level since Q1 2022, he noted due to Meteor Lake starting to grow (albeit slowly) and Raptor Lake is refreshing, while Advanced Micro Devices, Inc AMD it lacks a new CPU.
Meteor Lake represented only ~0.2% of the Intel laptop mix (only one SKU from Acer and one from Asus, 11 total SKUs) after the December release, according to Rolland’s checks indicating that MTL takes longer than expected.
Intel took a modest share of desktop CPUs, up +0.4% sequentially, as the Raptor Lake refresh continues to grow, the analyst writes.
Rolland raised its PC estimates for 2024, with sales up +1.7% year-on-year and ODM notebooks up +1.3% year-on-year, broadly in line with expectations for PC TAM from Intel and AMD.
Aftermarket GPU retail prices increased for both Nvidia Corp NVDA and AMD, with high-end cards selling above MSRP and GPU ASPs up +16.8% sequentially in Q1 2024, the first quarter of price increases since Q4 2021, according to the analyst.
Nvidia’s aftermarket GPU model share was nearly flat sequentially, but Nvidia lost discrete GPU model share in both notebooks and desktops, while the discrete GPU connection rate declined in both, flagged by Rolland.
Chromebook CPU share was broadly flat, with Intel flat sequentially, but Chromebook ASPs were up +7.1%. He added that SSD connection rates and capacities have increased again, now at ~97% (new high), a mature market.
Mizuho Analyst Vijay Rakesh reiterated a Buy rating on Intel with a $55 price target.
On Tuesday, Intel announced its new financial reporting structure, including the split of the core Intel Products and Intel Foundry groups and the announcement of Lorenzo Flores as Intel Foundry CFO (formerly Xilinx CFO), the analyst said. Intel Products has its own CFO, Mark Henninger.
Rakesh noted that Intel is targeting ~60% and 40% gross margin and operating margin for its Products business, in line with previous targets, while the Foundry business is targeting long-term 40% and 30% gross margin and operating margin, though nearly long-term operating margin much lower at (37%).
The analyst noted that the key focus for Intel remains the execution of the product roadmap with Granite Rapids/Falcon Shores and significant margin improvement in its Foundry business as it looks to become the top Foundry globally.
Intel provided more color as expected on Intel products, where Rakesh noted that Intel continues to use 60% and 40% gross margin and operating margin targets versus its estimate of ~50% gross margin and ~24% operating margin today .
In the medium term, the analyst said Intel sees foundry operating margin at breakeven and gross margin at ~15-20%. For Foundry, the company is targeting ~$15 billion in external revenue by 2030 with a gross margin and operating margin of 40% and 30%, much better than the company’s current operating margin of negative (37%) with over $15 billion in lifetime value agreement already.
Intel noted its foundry roadmap and plans to reduce wafers outsourced to <20% by 2030 vs. ~30% today, according to the analyst. Also, Intel plans to move to ~80% of production in EUV by 2030 (versus 10-15% today).
Intel stock has gained 23% over the past 12 months. Investors can gain exposure to the stock through First Trust Nasdaq Semiconductor ETF FTXL and Invesco PHLX Semiconductor ETF SOXQ.
Action Price: Shares of INTC traded up 0.32% at $40.46 in late trading on Thursday.
Read also: Intel targets $15 billion in foundry revenue by 2030, but analyst says TSMC will be ’10 times bigger’
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