Intel (INTC) is on the comeback trail. The chip giant has lost its luster in recent years, as both Nvidia and AMD have delivered superior products and eaten away at its market share.
But Intel is certainly outperforming its hipper rivals in 2021. Year-to-date, the stock is up by 29%, delivering far better returns than both rivals, while the SOX – the major semiconductor index – is up by only 9%.
New CEO Pat Gelsinger has wasted no time in putting his stamp on proceedings. The new man at the helm laid out Intel’s IDM (integrated device manufacturer) 2.0 strategy last week, and Needham’s Quinn Bolton liked the latest developments.
Specifically, the company will keep on building most of its 7nm products in-house but at the same time increase the outsourcing of chip manufacturing to third-party foundries.
These include the production of modular tiles using state-of-the-art process technologies for the company’s client and data center CPUs as well as the Ponte Vecchio GPU.
“As a result,” said Bolton, “Intel is increasing its engagements with TSMC, Samsung, GlobalFoundries and UMC.”
As part of the new strategy, Intel will launch a new foundry business, called Intel Foundry Services (IFS).
Asia is now where the majority of the world’s cutting edge foundry capacity is based, and Bolton says the company launched IFS to “address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity.”
IFS will have facilities in the U.S. and Europe. The focus will be on acquiring commercial customers, as well as finding “unique opportunities in government and security requirements in the U.S. and E.U.”
The company will also splash out $20 billion on two new fabs in Arizona, which Intel will begin constructing this year.
Furthermore, Intel is addressing the issues which have delayed the release of its next-gen 7-nanometer chips. Bolton says the company is “righting this wrong.” By more than doubling its use of EUV (extreme ultraviolet), it has now “re-architected and simplified its 7nm process flow.”
The company also gave an update on its earnings projections. Driven by “continued strength in notebook demand,” Intel anticipates beating its current 1Q21 revenue guidance of $17.5 billion and EPS forecast of $1.10.
To this end, the 5-star analyst reiterated a Buy rating on INTC shares along with a $74 price target. The implication for investors? Upside of 16%. (To watch Bolton’s track record, click here)
However, in contrast to Bolton, not all on the Street are convinced of a turnaround just yet. INTC stock has a Hold consensus rating, based on 13 Buys, 12 Holds and 8 Sells. The forecast is for modest upside of 4%, given the average price target stands at $66.34. (See INTC stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.