Intel Corporation's (NASDAQ:INTC) turnaround efforts under the new CEO Pat Gelsinger have not elicited much confidence among sell-side analysts. An analyst at Atlantic Equities Monday lowered his opinion on the shares.
The Intel Analyst: Ianjit Bhatti downgraded Intel shares from Neutral to Underweight and lowered the price target from $63 to $45.
The Intel Thesis: Intel's IDM 2.0 strategy, which may be the best long-term strategy, will drag the chipmaker's profitability until at least 2025, analyst Bhatti said in a note. Also, IDM 2.0 does nothing to address continuing market share losses to rival Advanced Micro Devices, Inc. (NASDAQ:AMD), he added.
Intel, the analyst said, continues to suffer from data center digestion, as evidenced by the accelerating decline in cloud revenue in the first quarter even as AMD's cloud revenues doubled.
"We believe that AMD is now the preferred CPU supplier to most cloud customers for new workloads, with market share gains to accelerate in 2021," the analyst wrote in the note.
AMD has also gained PC CPU revenue share in the March quarter, as Intel's ASPs declined due to the company giving up the high-end of the market, Bhatti said. While Intel noted supply issues impacting PC shipments in the second half of 2021, AMD guided to improving supply, creating potential downside to PC forecasts, he added.
AMD's chiplet technology provides a substantial cost advantage against Intel's monolithic CPUs, the analyst noted. Intel could release CPUs using chiplets in 2021, but AMD's lead with the technology will still deliver a cost advantage, enabling sustained market share gains, he added.
Intel's strong customer relationships that historically created a barrier to AMD adoption are no longer applicable, Bhatti said.
"Ultimately customers benefit from the erosion of Intel's CPU hegemony, with a resurgent AMD giving buyers more negotiating power," the analyst said.
INTC Price Action: At last check, Intel shares had slipped 2.95% to $55.97 at market close Monday.