Intel’s Path to Redemption: A Buy Opportunity Amidst Foundry Focus and Financial Framework Overhaul

Intel Corporation (NASDAQ: INTC) has faced challenges in 2024, underperforming the S&P 500 with a YTD total return of -12%. Despite this, recent developments suggest potential opportunities for investors to consider:

1. Revised Financial Reporting Framework:

• Intel’s management introduced a new financial reporting framework aimed at providing greater clarity and discipline, particularly for its foundry and products business.
• While the disclosed segment loss of $7B for Intel Foundry in 2023 may have initially rattled investors, the company is committed to achieving breakeven profitability before 2030.

2. Margin Accretion Potential:

• Intel is targeting an adjusted gross margin of 40% and an adjusted operating margin of 30% for Intel Foundry by 2030.
• The company’s transition to Intel 18A and its focus on reducing foundry outsourcing while improving efficiency and scale could drive significant growth opportunities.

3. Fundamental Strengths:

• Intel boasts a fundamentally strong business model, supported by an “A+” profitability grade.
• Despite execution risks associated with the ramp-up of Intel Foundry, the company’s momentum remains robust, indicated by a “B” momentum grade.

4. Technical Analysis:

• INTC has found strong support around the $40 level, with buyers stepping in to prevent further decline.
• While there may be short-term volatility, high-conviction investors could view any pullbacks as opportunities to accumulate more INTC shares.

Conclusion: Given the potential for margin accretion and Intel’s fundamentally strong business model, coupled with ongoing momentum, there may be a case for upgrading INTC to a Buy rating. However, investors should remain vigilant of execution risks and market dynamics, considering INTC’s long-term growth prospects amidst industry competition.