“Limited downside but still too early to turn bullish” by Investing.com

Investing.com – HSBC upgraded Intel (NASDAQ:) from downgrade to hold in a note on Tuesday, citing limited downside following a correction in the stock.

Since Intel’s earnings announcement for the second quarter of 2024, the stock has fallen by about 26%, while the index has risen by 9%.

HSBC notes that the stock has now reached its $20 price target, suggesting it is fairly priced in amid the ongoing uncertainty.

“We believe the market has taken into account the recent uncertainties related to the implementation of the IDM 2.0 strategy as well as the attrition of senior management with the resignation of CEO Pat Gelsinger in December 2024,” HSBC analysts stated.

Intel’s upcoming Q4 2024 earnings are expected to be in line with market expectations. HSBC expects revenues of $13.8 billion, within the guidance range of $13.3 billion to $14.3 billion, which is in line with consensus estimates.

However, expectations for the first quarter of 2025 appear less optimistic, according to the bank.

HSBC expects a 9% quarter-on-quarter decline in revenue, below the consensus estimate for a 6% decline, largely due to potential weakness in the data center sector.

“Going into 1Q25e, we believe there may be some revenue downside,” the analysts wrote, adding that they expect this to pressure Intel’s gross profit margin, which they estimate at 38.5%, below the consensus of 39.1%.

HSBC also highlighted ongoing concerns about Intel’s foundry strategy. “Although we acknowledge that the worst is over for Intel, it is still too early to have a clear vision on its implementation leading to an overall business recovery.”

Although 2025 EPS estimates were revised from $1.19 to $1.04, HSBC maintains a price target of $20, reflecting limited downside. The analysts concluded by saying: “We are waiting for clear signs of recovery to appear before we head towards the upside for the stock.”