Intel (NASDAQ: INTC) delivered a strong second quarter, beating Wall Street’s earnings and revenue expectations by a wide margin. Yet despite the strong results, most analysts aren’t rushing to upgrade the stock.
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In fact, the company posted adjusted EPS of 42 cents a share, twice the 21 cents analysts had expected. Revenue climbed 25% from a year ago to $16.1 billion, well above the consensus estimate of $14.42 billion, according to CNBC.
The stock has already been one of the market’s biggest winners this year thanks to strong demand for artificial intelligence infrastructure.
During the earnings call, INTC reaffirmed plans to move ahead with its next-generation 18A and 14A manufacturing processes, two key technologies that are central to its long-term strategy. The company also said production of its 18A chips is running about 25% ahead of internal targets and has increased more than 50% since the previous quarter. Those updates gave investors another reason to believe Intel’s turnaround is gaining momentum.
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Still, many analysts argued that while things are improving, there are still important questions about how much upside remains after such a massive rally.
Wells Fargo was among the firms that praised Intel’s progress while keeping a cautious stance. Analysts reiterated an Equal Weight rating and raised their price target to $120 from $110. The firm added that the company has made progress, but it is still too early to declare victory. They also pointed to three reasons for staying on the sidelines: INTC still needs to prove it can consistently lead in manufacturing technology, its gross profit margins have yet to fully recover, and competition from AMD and Arm-based processors remains intense.
Goldman Sachs kept a Neutral rating but lifted its price target to $150, one of the highest targets on Wall Street. They also believe the company is well positioned to benefit from growing demand for AI servers.
Bulls See More Room to Run
JPMorgan nearly doubled its price target to $85 from $45 after the earnings report but kept an Underweight rating. Even with the higher target, JPMorgan believes the stock is trading above its fair value. The firm acknowledged INTC’s improving business trends, including higher capital spending and continued demand for chips.
However, the firm added that investors are still waiting for proof that major outside customers are ready to trust Intel with manufacturing their most advanced chips.
Bank of America continues to be one of Intel’s biggest supporters.
The firm reiterated its Buy rating and maintained a $160 price target. Bank of America added that Intel’s earnings reinforced its bullish thesis in two important ways. First, discussions with potential foundry customers appear to be moving closer to real business agreements. Second, Intel’s core server business is benefiting directly from the AI boom. Data-center revenue jumped 59% from a year ago, the company’s fastest growth rate in about 15 years.
It also believes INTC’s U.S.-based manufacturing footprint gives the company a strategic advantage as Washington continues to support domestic semiconductor production. The biggest risk is how Intel will finance its growing investment plans. While investors have questioned whether the company may eventually need to raise capital, Bank of America believes Intel has other options, including selling non-core assets.
Bernstein analysts were also optimistic, even while maintaining a Market-Perform rating. The firm added that Intel’s server business continues to outperform expectations, manufacturing progress remains encouraging, and customer interest in its packaging business is improving. In addition, the firm said the company looks stronger today than it has in quite some time.
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Intel’s turnaround is becoming stronger. Nowadays, the debate is no longer whether the company is making progress. Instead, investors are asking whether a stock that has already skyrocketed this year still has enough room to climb higher.
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