Intel Corp. Chief Executive Lip-Bu Tan seems to be making interesting moves early in his tenure, but that doesn’t mean he’ll achieve success easily. The company has missed out on the artificial-intelligence wave and fallen behind with its technology. It’s also trying to revive its foundry business.
Righting the ship at Intel (INTC) seems like a “herculean task,” according to Bernstein analyst Stacy Rasgon. He quipped, “Hercules cleaned out the Augean stables in a day, but even he would take longer to executethis turnaround.”
Intel shares are down about 7% in midday action Friday, following yet another messy report from the chip company. While Intel beat expectations for the latest quarter, its outlook came up short, reflecting caution about the economy. There are also concerns about whether customers pulled forward purchases into the first quarter as they tried to get ahead of tariffs.
Read: Intel going back to its roots, but latest plans will be costly and stock tumbles on outlook
“On the positive, one might be able to argue conservatism around the numbers going forward,” Rasgon wrote, noting that “Intel is one of the few semi companies to report so far that is actually trying to bake in tariff/macro downside).”
However, Intel is “in fact likely more directly exposed to tariffs than others (so taking a more cautious stance seems warranted), and at this point one is probably not owning Intel for the numbers anyway which (conservative or not) look horrendous.”
As for Tan’s turnaround plans, Rasgon noted that the new CEO, who took over last month, is trying to improve company culture and reduce bloated costs. The “bull thesis” on Intel’s stock is more about that turnaround than about the numbers, according to Rasgon, but he flagged that there were at least five instances on Intel’s earnings call in which Tan said something like there are “no quick fixes” for the company.
Rasgon and his team “see no rush to get involved” with Intel’s stock, which they rate at market perform with a $21 target price.
Evercore ISI analyst Mark Lipacis keyed in on that messaging as well.
Tan “lowered the bar and underscored that there was no quick fix to turn [Intel] around – we agree Intel is so huge that shifting its course is like turning a battleship – it cannot be done on a dime,” he wrote. “That said, we like his approach of flattening the organization, reducing bureaucracy, and shifting the company to a client-centric culture.”
In all, Tan has “a lot of wood to chop,” which is why Lipacis and his team are staying on the sidelines as well. What would make them get more positive? “Evidence of execution and improvement in market share,” Lipacis said in his latest report.
Evercore rates Intel’s stock at in-line with a $23 price target.
Jefferies analyst Blayne Curtis was content waiting this one out as well.
“As much as we would like to get behind the stock at this level, there seems little to get excited about from a product, foundry or financial perspective,” he wrote. Intel’s stock is down 43% over the past year.
Curtis and his team “understand there is some clearing the decks in the weaker guide but it will take a long time for Lip-Bu to put his stamp on [Intel], and we’ll continue to sit on the sidelines until we have a better vision of the turnaround,” he wrote, while maintaining a hold rating and $23 target price.
