Intel's valuation is stretched on challenged fundamentals, BofA says

Investing.com -- Bank of America downgraded Intel Corp to Underperform, saying the stock’s recent surge has priced in improvements that the company’s fundamentals may not deliver.

The brokerage maintained its price target at $34, below shares current trading price of $37 on Monday trading.

BofA said Intel’s roughly $80 billion market-cap gain over recent months is on stronger balance sheet and potential in foundry services, rather than material operational improvements.

Intel still faces challenges in server CPUs, has no clear artificial intelligence accelerator strategy, and now has reduced flexibility to divest loss-making manufacturing units.

At current levels Intel’s valuation assumes roughly $1.68 in 2027 earnings per share, about 42% above consensus, implying an incremental $10 billion in revenue from either organic CPU growth or external customer wins. Analysts say such growth is unlikely given competition and Intel’s execution constraints.

The brokerage also questioned the methodology used by some investors to value Intel, criticizing sum-of-parts approaches that treat its foundry business separately.

“The term ‘foundry’ is a misnomer,” BofA analysts said. Intel relys on TSMC for about 30% of production and uncertainties around upcoming 18A and 14A process nodes.

U.S. government support is expected to keep the company manufacturing domestically regardless of profitability, limiting upside from a potential spin-off.

BofA acknowledged that Intel’s partnerships and capital injections from the U.S. government, Nvidia, Softbank, and Altera could provide modest support, particularly in enterprise AI, packaging, or ASIC wins.

A path to material wafer processing gains is not visible for several years, keeping the stock exposed to downside if operational progress lags expectations.

Shares of Intel have risen nearly 20% this year, outperforming the broader semiconductor index, but BofA said much of this rally may already be reflected in the current price.

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