7. Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Goldman Sachs has cut its earnings estimates for the semiconductor giant, pointing to “muted” demand for PCs.
“…[W]e reduce our 2025/26 non-GAAP EPS (excl. SBC) estimates by 7% as we reflect a slower recovery in the PC CPU and FPGA businesses, partially offset by a more constructive outlook for server CPUs,” analyst Toshiya Hari wrote in a client note. “While we believe management is taking steps to right-size the organization, we remain cautious on the stock as we have yet to see signs of a return to process technology leadership. In fact, Intel may continue to outsource a significant portion of its client CPU tiles to TSMC beyond 2025, according to our checks, and the company still lacks a major presence in the profitable data center accelerator market.”
Hari kept his Sell rating and a $21 price target on Intel Corp (NASDAQ:INTC).
Intel faces challenges as it navigates a major restructuring plan, which includes cutting around $10 billion in operating expenses and reducing its workforce by 15,000 this year. Inte is only expected to achieve free cash flow positivity by 2025, and for 2024, it anticipates modestly negative adjusted free cash flow due to restructuring costs and reduced capital spending.
Intel’s plan involves lowering operating expenses to about $17.5 billion while keeping net capital expenditures between $12 billion and $14 billion in 2025. However, with $25 billion in net debt and ongoing restructuring, the path to recovery and rebound for Intel is long.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
