Bernstein Analysts Want You To Forget Intel (INTC) Until At Least 2030

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With deteriorating margins and no definitive bottom in sight, is Intel destined to serve as a glorified tax offset for the next few years? This indeed appears to be the case, as per the subtextual gist of a new investment note from Bernstein.

Intel’s Foundry Strategy

Intel detailed its foundry strategy at a dedicated event earlier this week, highlighting a potential path to regaining the edge in chip manufacturing that currently resides with TSMC.

Intel’s foundry unit intends to improve its margins and win back lost orders by focusing on areas such as chip expedites and test times.

TSMC is currently mass producing chips on its flagship 3-nm node. In response, Intel is now touting its 18A process that leverages a 2-nm node. Expected to launch in 2025, Intel’s 18A process has already received five customer commits, with many more presumably in the pipeline.

On a more sobering note, Intel declared that its founder business will only achieve break-even operating margins by 2030, with 2024 expected to see the absolute nadir in terms of operating losses.

Bernstein: “No Real Reason To Be Here Until 2030”

This brings us to the crux of the matter. Bernstein analysts have now published a hard-hitting investment note, calling into question the chipmaker’s near-term bullish thesis.

While conceding that Intel’s “foundry economics” have been “awful” for quite a while now, Bernstein analysts pilloried the chipmaker for its morose guidance on operating margins:

“That being said, the idea that things are still getting worse in 2024 might have been taken somewhat poorly; if anything, the idea that a -37% operating margin and $7B loss do not yet represent a trough is somewhat breathtaking especially given all the cost cuts the company was supposedly implementing last year.”

What’s more, the investment firm’s analysts are also skeptical as to Intel’s ability to achieve operating margins of between 25 and 30 percent by 2030, terming this target as “speculative” and “heavily dependent on optimal progress.”

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