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Truist analyst William Stein believes that Intel CEO Lip-Bu Tan faces a long road ahead in turning around the company’s business, despite Softbank’s $2 billion investment. In today’s report, Stein maintained a Hold rating for Intel shares and kept a $21 share price target. He highlighted that Intel’s success hinges on leveraging its culture, customers, and capabilities to transform the business. However, Intel’s shares have dropped 7% today amid investor concerns about deep-seated profitability issues and the company’s ability to cater to the AI industry while keeping up with smaller rival AMD in data centers.
Intel’s Successful Turnaround Efforts Have Taken & Will Continue To Take Time, Says Investment Bank
After jumping 7% yesterday on Softbank’s $2 billion investment, Intel shares have now lost these gains as Wall Street continues to evaluate the firm’s future. The stock rallied after reports that the Trump administration might convert Intel’s grants into equity, causing investor concern about potential stock dilution.
Intel’s balance sheet troubles, particularly costly agreements requiring regular payouts to asset managers, have limited earnings growth prospects. Consequently, investors are pinning their hopes on the spinoff of the foundry business, which could help grow profitability by removing these agreements from the primary company’s financials.
However, Intel CEO Lip-Bu Tan is committed to defending the firm’s foundry business. In his first letter to employees, he emphasized that under his leadership, Intel would become a “world-class foundry” through focused engineering and product development.
Stein appreciates Softbank’s $2 billion stake but cautions that only time can solve Intel’s challenges. “Incremental capital helps, but INTC’s solution lies in culture, capabilities, & customers,” writes the analyst. His firm sees Intel still enduring through a turnaround phase centered on these factors. Achieving these objectives has already taken time, and Stein warns that it will take more time for results to materialize under CEO Lip-Bu Tan.
Intel’s woes raise concerns about US chip manufacturing supremacy since it is the only American firm capable of high-end chip production. The shares have struggled this year due to worries about profitability and whether Intel might need to write off its advanced manufacturing processes if they don’t attract sufficient external customer interest.
Stein notes that “If and when [these] objectives are satisfied, we would consider INTC as entering an execution phase.” However, even this will take time. As a result, the long-term uncertainties force Truist to maintain its current rating and share price target for Intel’s stock.
