By Senad Karaahmetovic
Bank of America analysts reiterated an Underperform rating on Intel (NASDAQ:INTC) stock following the recent market selloff.
Intel shares fell nearly 12% in February after the company delivered yet another disappointing earnings report in late January. Compared to April 2021 highs, Intel stock trades over 60% lower in March 2023.
Analysts believe it’s “time for Plan B” after Intel stock came close to testing its book value of $24.52/share for the first time. They remind investors that this valuation metric is normally associated with commodity tech stocks.
“Excluding its recent partial Mobileye divestment, INTC stock is already being perceived below book, theoretically indicating a value reducing company strategy and/or negligible benefits of intangibles (intellectual property, brand, design, scale, manufacturing, compute market incumbency),” analysts wrote in a client note.
The analysts believe Intel’s IDM (integrated design/manufacturing model) is “structurally misaligned with industry direction.” Moreover, they remind Intel investors that the competition with ARM-based PC/server rivals is just starting.
“The current IDM structure raises barriers for INTC design teams to depend too much on external foundry (hurts internal manufacturing utilization), while making it tougher for IFS to engage with external customers (severe conflict of interest w/INTC design and compute products while risking/sub-optimizing current TSMC relationships),” analysts added.
The analysts' price target of $25 per share on Intel stock suggests a downside risk of about 5% relative to Friday’s closing price.