On Monday, BofA Securities maintained an Underperform rating and a $21.00 price target for Intel Corporation (NASDAQ:INTC), following the tech giant's announcement of CEO Pat Gelsinger's unexpected retirement.
Intel named interim co-CEOs David Zinsner and MJ Holthaus to lead the company. Zinsner was previously the Vice President and Chief Financial Officer, while Holthaus served as the Executive Vice President and General Manager of the Client Computing Group (CCG).
The management shift comes amidst Intel's struggles with its "IDM 2.0" strategy, which has yet to demonstrate significant progress. The company continues to face challenges with gross margins and free cash flow, which are expected to remain under pressure at least into the first half of 2025. Additionally, Intel has not yet secured any volume customers for its Intel 18A wafer.
BofA Securities notes the possibility of Intel considering a separation of its Products and Foundry businesses to allow for operational and financial independence. However, there are significant obstacles to a full split, particularly the $8 billion award from the CHIPS Act, which requires Intel to maintain a 35%-50.1% stake in the foundry business.
The firm also points out that while the management change might offer a short-term uplift to Intel's stock, the underlying strategic, structural, financial, and competitive challenges facing both the Products and Foundry arms remain unresolved. The potential for more flexibility in the event of changes to the CHIPS Act under a new U.S. administration was acknowledged, but the firm emphasized that no immediate solutions are evident for the issues Intel faces.
In other recent news, Intel is undergoing a significant leadership change with the retirement of CEO Pat Gelsinger. Interim co-CEOs David Zinsner and Michelle Johnston Holthaus have been appointed, marking a critical transition for the company. Intel's recent earnings report reveals a third-quarter revenue of $13.3 billion, a 4% sequential increase, and full-year guidance for Mobileye with $485 million in revenue.
The company's programmable chips division, Altera, also reported a 14% sequential increase in revenue, reaching $412 million for the quarter ending in September.
The company's leadership transition and recent earnings results come amidst the backdrop of the U.S. Department of Commerce's direct funding award through the CHIPS and Science Act, which introduces certain limitations for Intel. The act imposes restrictions on specific change of control transactions, including maintaining majority ownership of Intel Foundry, potentially affecting the company's strategic options.
Meanwhile, Advanced Micro Devices (NASDAQ:AMD) has been gaining significant market share over Intel, with Bank of America (NYSE:BAC) maintaining a "Buy" rating on AMD, citing PC and server share gains. On the other hand, Intel has received an "Underperform" rating from Bank of America due to CPU share losses.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.