By George Glover
There's more work for Intel to do before it can turn the page on a brutal year, warned J.P. Morgan, after the chip maker beat Wall Street's revenue targets and issued better-than-expected guidance for the current quarter.
The stock was rising on Friday as shares increased up 7.2% to $23.07 ahead of the opening bell. Futures for the benchmark S&P 500 climbed 0.4%.
Intel could do with a boost. Its stock has plummeted 57% this year as investors fret about slumping revenue and impairment charges, and the company is carrying out one of its biggest-ever restructurings in a bid to steady the ship.
But shareholders shouldn't get carried away despite the company's revenue beat and mildly optimistic guidance, J.P. Morgan analyst Harlan Sur said, while sticking with an Underweight rating and a $26 price target that implies the stock can climb about 13% from its Friday levels.
Top of his list concerns are Intel's weak gross margins, which tumbled 18% in the third quarter because of a sizable $18.7 billion in restructuring and asset impairment charges, as well the slow uptake of its Gaudi artificial intelligence chips.
Sur's warning chimes with what Intel's CEO told Barron's in a phone interview after Intel reported its latest earnings. Pat Gelsinger said the company was seeing a lot of customer interest for its Gaudi AI-accelerators, but they are "not going to achieve" the prior $500 million forecast in revenue for the products this year.
He added that he was frustrated about the slow progress of the Chips Act, with Intel yet to receive any government funding. In March, Intel and the Biden Administration announced that the Commerce Department had proposed giving the company up to $8.5 billion in direct funding to the chip maker from the Chips and Science Act.
Write to George Glover at george.glover@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 01, 2024 08:59 ET (12:59 GMT)
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