Intel Shares Rally Despite Analyst Caution Over Foundry Strategy and Competitive Pressures

Earnings Beat Drives Stock Surge

Intel shares reportedly surged in Friday’s premarket trading after the chipmaker delivered better-than-expected third-quarter revenue, according to financial reports. The company posted revenue of $13.65 billion, exceeding analyst expectations of $13.14 billion. Despite this positive performance, sources indicate Wall Street remains cautious about Intel’s long-term prospects, particularly regarding its substantial investments in the foundry business and competitive positioning.

The stock has rallied approximately 25% year-to-date, with an 8% jump in premarket activity following the earnings announcement. However, analysts suggest the company faces significant headwinds, including its fourth-quarter revenue guidance of $13.3 billion at the midpoint, slightly below forecasts, according to the report.

Wall Street’s Cautious Stance

Multiple major financial institutions maintained negative to neutral ratings on Intel stock, with price targets suggesting potential downside from current levels. Analysis from these firms highlights concerns about Intel’s foundry business, competitive challenges, and margin pressures despite acknowledging solid near-term execution.

Citi maintained its sell rating with a $29 price target, representing approximately 24% downside potential. Analyst Christopher Danely reportedly stated that while Intel posted good results, the guidance was lower as “the foundry business loses money.” The analysis suggests Intel shareholders would be better served by exiting the merchant foundry business, according to the report.

Foundry Business Concerns

Intel’s Foundry business, which manufactures chips for other companies, emerged as a significant concern among analysts. The division requires a capital investment of $100 billion and has not yet secured a major external customer, according to the reports. In the last quarter, the business reportedly generated $4.2 billion in sales, representing a 2% year-over-year decline.

Bank of America maintained an underperform rating with a $34 price target, citing multiple challenges. Their analysis reportedly flags gross margin pressure with guidance of 36.5% for the fourth quarter, down 350 basis points quarter-over-quarter. The firm also noted “subscale manufacturing with no large external customer wafer order” and “lack of an AI accelerator” as ongoing concerns.

Competitive Landscape Challenges

JPMorgan, which raised its price target from $21 to $30 while maintaining an underweight rating, reportedly views Intel’s competitive positioning as “fundamentally challenged for at least the next 12-18 months.” Their analysis suggests Intel is likely to continue losing market share to AMD in both PC/client and server segments, according to the report.

Deutsche Bank maintained a hold rating with a $35 price target, acknowledging Intel’s fundamental improvements but cautioning that “generating the financial fruits of these labors remains a multi-year process.” The analysis suggests that while Intel may benefit from event-driven optimism around potential foundry partners and AI collaborations, a return to focus on fundamentals could create headwinds for the share price.

Mixed Outlook Among Analysts

While most analysts expressed caution, some firms offered more balanced perspectives. UBS maintained a neutral rating with a $40 price target, suggesting potential upside of approximately 5%. Their analysis reportedly noted that external foundry efforts represent a longer-term payoff but could benefit from potential involvement by major technology companies like Apple, Google, or Microsoft.

Wells Fargo maintained an equal weight rating with a $45 price target, representing about 18% potential gain. Their analysis reportedly described the third-quarter performance as “solid upside” and suggested the fourth-quarter guidance is likely viewed as conservative. The firm noted comments about demand exceeding supply into 2026 and increased roadmap confidence as factors driving shares higher.

Margin and Execution Concerns

Bernstein maintained a market-perform rating with a $35 price target, reportedly cautioning that “2026 margins could be faced with a variety of headwinds.” Their analysis suggests that while the company has made progress, “this fight is far from over; perhaps it’s better to call it a draw for now.”

Morgan Stanley maintained an equal-weight rating with a $38 price target, noting that while they appreciate some of Intel’s new directions, their focus remains on “the core CPU business & the roadmap, where we are looking for proof points.” Their analysis reportedly expected higher fourth-quarter guidance given supply constraints observed in the market.

Despite the stock’s recent surge, the consensus among Wall Street analysts suggests Intel faces significant challenges in transforming its business model and competing effectively in both product and foundry segments, according to the reports. The company’s ability to secure major external foundry customers and improve margins while navigating intense competition will likely determine its long-term trajectory.

References

• http://en.wikipedia.org/wiki/Foundry
• http://en.wikipedia.org/wiki/Intel
• http://en.wikipedia.org/wiki/Wall_Street
• http://en.wikipedia.org/wiki/United_States_dollar
• http://en.wikipedia.org/wiki/JPMorgan_Chase

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