Wolfe Research analysts raised their rating on Intel (NASDAQ:INTC) stock from Underperform to Peer Perform, saying their cautious thesis has successfully played out, noting limited margin improvement in calendar year (CY) 2024/25 despite the achievement of a manufacturing strategy involving five nodes in four years.
“Our cautious thesis on INTC hasn't changed. But the stock is now down 38% YTD and details from the company's foundry event and recent earnings have confirmed our thesis, while sentiment toward the stock is low,” analysts wrote.
They highlight that server CPU growth alone cannot cover the substantial capital expenditure (CapEx) and depreciation required for Intel's 5N4Y manufacturing strategy.
This, Wolfe says, was validated by Intel's recent disclosure that it doesn't expect its manufacturing segment to break even until CY27, with profitability relying on a larger foundry business by the end of the decade.
“That said, this is now part of investor expectations, and we do expect some incremental GM improvement in CY25 as startup costs decline and as INTC begins to take more tiles in house, albeit modestly. As such, we're taking the opportunity to move the stock to Peer Perform,” analysts continued.
INTC shares rose 1% in premarket trading.