Intel shares plunge after chipmaker reveals ugly foundry financials

Intel (International Trade CentreShares of the chipmaker fell on Wednesday after the company disclosed weaker-than-expected financials at its emerging foundry business. Wall Street analysts are skeptical of the unit’s near-term prospects.


Intel executives detailed Tuesday night how they are dividing the company’s business into two main businesses: selling finished products and providing chip manufacturing services. Intel Products Group is a customer of Intel’s foundry business.

Currently, 95% of Intel Foundry’s business comes from the Intel Products division, but Intel’s goal is to become the world’s second largest foundry chip manufacturer British Semiconductor (TSM).

Analysts, however, are alarmed by the deepening losses in Intel’s foundry business. The manufacturing business posted an operating loss of $7 billion in 2023, compared with an operating loss of $5.2 billion the year before. The segment’s 2023 revenue will be $18.9 billion, down 31% from $27.5 billion in 2022.

Intel shares fall on news

period Investor introductionCEO Pat Gelsinger said operating losses in the foundry business will peak in 2024. He said Intel expects the unit to achieve operating breakeven around 2027.

“It’s not pretty, but we appreciate management’s bold admission that the foundry business will take years,” Rosenblatt Securities analyst Hans Mosesmann said in a client note. Appreciate the time it takes to get to the right scale.” He reiterated a sell rating on Intel stock with a 12 rating and a 17 price target this month.

superior Today’s stock marketIntel shares fell 8.2% to 40.33.

Analysts said that by separating its two main businesses, Intel is providing greater transparency to investors and potential foundry customers.

It is not a prelude to the company’s split

Wedbush Securities analyst Matt Bryson expressed doubts about Intel’s financial targets.

“The main criticism yesterday seemed to revolve around Intel’s ambition to achieve 60% gross margin and 40% operating margin by 2030,” Bryson said in a client note. “While that goal echoes Intel’s previous long-term model, , but the timing is 3-4 years later than Intel previously expected.”

While Intel is separating its two main businesses internally, don’t expect it to split into two companies like this Advanced Micro Devices (AMD)Done GlobalFoundries (government financial secretary), Daniel O’Regan said in a client note. O’Regan is managing director of equity trading at Mizuho Securities.

“While some may see this as a potential step toward spinning off the company into a fabless chip company and focusing on foundry/manufacturing, such a move is unlikely to happen in the next few years,” O’Regan said.

Intel stock ranks No. 6 among 33 stocks in IBD’s Semiconductor Manufacturing Group IBD inventory check.

In addition, Intel also received substantial funding from the U.S. government under the Chip and Science Act.Government funding aims to bring cutting-edge semiconductor manufacturing back to U.S.

Follow Patrick Seitz on X (formerly Twitter): @IBD_PSeitz Read more stories about consumer technology, software and semiconductor stocks.

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