Intel estimates cut at UBS

Intel Corporation (NASDAQ:) was maintained at Neutral with a $38 price target by UBS on Wednesday, but analysts from the firm are cutting their estimates for the company.

The firm is trimming estimates due to the company’s lower first-half 2024 gross margin, they stated.

“Our estimate cuts are largely the result of lower gross margin – particularly in 1H:24 – but our view on the stock remains unchanged,” the analysts explained. “We are now modeling gross margin to step back slightly from FQ4 (Dec) levels in 1H:24 but expect a solid 2H:24 hockey stick, exiting the year at 47.5%.”

Still, they stated that their firm is “quite optimistic about the progress INTC is making on the 18A process” while execution is improving, and the “new segment P&L in ’24 should facilitate a SOTP valuation.”

However, they “skew pessimistic on consumer end markets and the data center product roadmap through ’25 – especially in AI.”

“Given macro headwinds, we are also cutting capex assumptions. We now assume C2024 gross capex about flat at ~$25.5B, stepping up to ~$28B (gross) in C2025. We assume offsets of ~$10B in ’24 and ~$12B in ’25. Net, we see FCF of essentially zero in C2024 growing to nearly $5B in 2025 – fueled by ~14% Y/Y revenue growth and more capital offsets,” they revealed.