Stifel increased its price target for Intel Corporation (NASDAQ: INTC) shares from $35.00 to $42.00 on Friday following the semiconductor giant's strong fourth-quarter earnings report, yet retained a Hold recommendation on the stock. While Intel currently trades at $46.84, surpassing the new target, this price also exceeds InvestingPro’s calculated Fair Value, suggesting the stock might be trading at a premium despite its substantial 151.83% return over the prior year.
Intel's quarterly results highlighted revenue of $13.7 billion, an adjusted gross margin of 37.9%, and adjusted earnings per share (EPS) of $0.15, all surpassing analyst estimates of $13.4 billion, 36.5%, and $0.08, respectively. This outperformance was primarily driven by robust results in Intel’s Data Center and Artificial Intelligence (AI) businesses. However, despite this gain, overall revenue for the last twelve months measured $53.44 billion, reflecting a slight decline of 1.49% as per InvestingPro data.
Looking ahead, Intel's first-quarter guidance disappointed market expectations. The company forecasted $12.2 billion in revenue, a 34.5% adjusted gross margin, and a $0.00 adjusted EPS, each falling short of consensus estimates of $12.6 billion, 36.1%, and $0.06 respectively. Intel attributed this subdued guidance to "hand-to-mouth" inventory practices causing a temporary supply bottleneck amid continued high demand for server CPUs.
Stifel analysts pointed out that Intel’s manufacturing operations are running near full capacity. Yet, they see potential for organic margin improvement through enhanced manufacturing yields, operational consistency, product mix optimization, and pricing strategies without significant additional capital expenditures. They expect the current quarter to represent a fundamental low point, projecting margins to approach 40% by mid-2027 as Intel’s 18A process technology yields improve. This forecast would mark a significant climb from the current gross profit margin of 33.02%, according to InvestingPro figures.
The research firm identified the period spanning the second half of 2026 through the first half of 2027 as a critical phase for Intel, encompassing its first Investor Day under CEO Pat Gelsinger's stewardship. This timeline may represent a pivotal moment for Intel’s long-term volume commitments related to its 14A node and the scaling of advanced packaging technologies.
Despite positive outlooks, investors should be mindful of Intel's elevated valuation metrics. The stock trades at a price-to-earnings ratio near 1200 and an enterprise value to EBITDA of 27.15, underscoring high investor expectations for future growth.
Additional analyst reactions have been mixed but generally optimistic: Truist Securities increased its price target on Intel to $49, citing a promising trajectory for Intel’s foundry business despite ongoing supply constraints. Benchmark also raised its price target to $57 and reiterated a Buy rating on the back of the company’s strong quarterly showing. Conversely, Truist noted the company’s cautious Q1 guidance due to supply and cost challenges. TD Cowen maintained a Hold rating, suggesting that recent stock appreciation stems more from forward-looking narratives than current financial fundamentals. Bernstein held its Market Perform rating, and Cantor Fitzgerald kept a Neutral stance with a price target of $45, noting surprise at the stock’s rapid year-to-date rally.
This range of views illustrates a cautious balance of optimism regarding Intel’s longer-term prospects amid near-term headwinds caused by supply bottlenecks and elevated costs. Investors assessing Intel should consider this nuanced landscape amid the company’s ongoing transition and technology ramp-up.