The major question is whether Intel can scramble to the top of the global chip manufacturing heap.
It’s a bit hard to imagine now, but struggling chip company Intel (INTC -0.14%) was once a darling stock in the crowded tech sector. In the not-so-distant past, however, the once-dominant company started to become overshadowed by rivals developing and producing highly competitive products. Many observers started considering Intel something of a has-been, a sentiment that lingers in more than a few investor minds today.
One market professional who might seem to agree with that take is Bank of America Securities analyst Vivek Arya. After all, he recently lowered his price target on Intel stock while keeping his neutral recommendation. But there’s more to the story than that.
Neutral but hopeful
That cut was fairly deep; in mid-April, Arya lowered his Intel price target from $50 per share to $44. Yet even at the new level the analyst is expecting some upside — if realized, it would mean a gain of over 23% on the most recent closing share price.
Intel is in the midst of a concentrated push deeper into proprietary chip making. That’s because the great bulk of the world’s advanced chips are contract-manufactured by an overseas company, Taiwan Semiconductor Manufacturing. Intel would like to be a major counterweight to its Asian peer, hence the buildup of its Intel Foundry business unit (and a recent change in financial reporting to reflect the division’s growing prominence).
At the moment, Intel Foundry continues to post deep operating losses, but Arya sounded a bullish note on that business. He wrote that the “upcoming cyclical upturn in PCs,” plus a bump from artificial intelligence (AI) functionalities that will require greater processing power, could provide a decent lift for the company.
Much to prove
Arya also highlighted some negatives, however, not least of which is the buildup of other chip-making facilities by Intel rivals. So the veteran company undoubtedly has its work cut out for it in this new era despite the huge potential for the broader chip-making industry. Today’s Intel still has to convince investors it can be a solid competitor in this space; as of now, that crowd seems skeptical.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
