Intel stock jumped after a strong report. Why doesn't Wall Street believe in this rally?

Wall Street analysts generally maintained a cautious - neutral to negative - view of chipmaker Intel following the release of its third-quarter report, CNBC writes.

The semiconductor giant reported quarterly net profit for the first time since the end of 2023 and gave a strong forecast for PC processor demand in the current quarter. But one of the weaknesses of the report, according to analysts, was Intel Foundry, a business that manufactures chips for third-party companies. This area requires capital investment of about $100 billion, but has not yet attracted major customers. In the last quarter, the division received $4.2 billion in revenue, which is 2% less than a year earlier.

Intel's shares were up 8% in early trading on October 24, but then lost almost all of their gains. Since the beginning of the year, they have added more than 90%, outperforming the leaders of the AI chip market - Nvidia and AMD, notes Reuters.

- Citi maintained a "sell" recommendation on Intel stock with a target price of $29, implying a decline of about 24%.

"Intel performed well, but the outlook was weaker due to losses in the Foundry business. We believe it would be more favorable for shareholders if the company exited this business. The market, in our view, is overestimating its chances of success," said analyst Christopher Danley.

- JPMorgan also recommended to sell the securities (its rating is Underweight). But the bank's analysts raised the target price of Intel shares from $21 to $30. The new target is 21% lower than the current quotations.

"Intel's results and outlook show solid execution in the short term, supported by stronger demand in the second half of the year. However, the company's competitive position remains weakened for at least 12-18 months. Intel is likely to continue losing market share to AMD," the analysts said.

- Bank of America also maintains a negative rating (Underperform) with a $34 target price, down 11% from the Oct. 23 close.

"Demand for Intel chips is outstripping supply and is likely to remain so until next year. However, the company is facing pressure on margins - margins could fall to 36.5% in the fourth quarter, down 3.5pc from the previous quarter, with additional declines expected in 2026 due to the sale of the Altera division. The company faces strong competition in key segments and does not have its own AI gas pedal. We do not expect the Foundry business' cost base to improve quickly given the slow adoption of 18A technology (Intel's latest process technology at around 1.8 nanometers, designed to create higher performance and power efficient chips - Oninvest), whose peak capacity is not expected until 2030," the BofA report said.

- Deutsche Bank maintains a neutral stance with a target price of $35, about 8% below current levels.

"We see fundamental improvements and growing confidence in management, but getting tangible financial results will take several years. Most of the positive factors are already reflected in the forecasts and in the share price. In the near term, quotes will depend on news - partnerships at Foundry, AI projects and new product launches. When the focus shifts back to Foundry, pressure on the stock could resume," Deutsche Bank analysts said.

- Bernstein also recommends holding the stock (rating - Market perform) with a target price of $35.

"So far, there are signs that Intel's margins will be pressured by a variety of factors in 2026. We understand the company's desire to declare victory after a difficult period, but it's premature to talk about a complete turnaround - it's more likely to be a draw," Bernstein noted.

- Morgan Stanley maintains a neutral stance (Equal weight) and a $38 target price, which is in line with current levels.

"The strong third quarter results confirm the company's cautious approach, but the outlook for the fourth quarter was weaker than expected. We are impressed with the new directions, but the key remains the core processor business and roadmap, where we are waiting for confirmation of the announced successes," - said in a commentary Morgan Stanley.

- UBS also takes a neutral view with a target price of $40, which implies upside potential of about 5%.

"Intel's external Foundry projects on 14A process technology is a long-term initiative that requires significant investment. We do not rule out that the Trump administration could bring in players such as Apple, Google or Microsoft, which would be a strong positive signal for the company," said analyst Timothy Arcury of UBS.

- Wells Fargo rates the securities at Market Perform (Equal weight) with a target price of $45, assuming an upside of 18%.

"Strong third-quarter results, a conservative outlook for the fourth quarter and confidence in demand through 2026 are legitimately pushing the stock up. We are raising estimates and are positive on the prospects for restoring confidence in Intel," Wells Fargo said.

This article was AI-translated and verified by a human editor