‘Limited lows but still too early to be bullish’ By Investing.com

Investing.com — HSBC upgraded Intel (NASDAQ: ) from a reduce rating to a hold rating in a note on Tuesday, citing limited downside after a correction in the stock.

After the release of Intel’s second-quarter 2024 earnings, the stock fell nearly 26 percent, while the index gained 9 percent.

HSBC reports that the stock now meets its $20 price target, suggesting it is reasonably priced amid the ongoing uncertainty.

HSBC analysts said: “We believe the market has priced in the recent uncertainty surrounding the execution of the IDM 2.0 strategy, as well as the high level of leadership demands that CEO Pat Gelsinger has left.”

Intel’s upcoming fourth quarter 2024 earnings are expected to be in line with market expectations. HSBC forecast revenue of $13.8 billion, within a guidance range of $13.3 billion to $14.3 billion, in line with consensus estimates.

However, the outlook for the first quarter of 2025 looks less optimistic, the bank said.

HSBC expects a 9% quarter-on-quarter revenue decline, below the consensus estimate of a 6% decline, mainly due to possible weakness in its data center division.

“We believe there may be some downside to earnings as we enter 1Q25e,” the analysts wrote, adding that they expect this to put pressure on Intel’s gross margin, which is estimated at 38.5%, below the consensus of 39.1%.

HSBC highlighted continuing concerns about Intel’s founding strategy. “While we acknowledge that the worst seems to be over for Intel… it is still too early to have a clear view of the performance that will lead the overall business to recovery.”

Although they revised their 2025 EPS estimate to $1.04 from $1.19, HSBC has a target price of $20, reflecting limited downside. The analysts said, “We are waiting for clear signs of recovery before we make a noise on the stock.”