Investors continue to cheer Intel Corp (NASDAQ: INTC) following reports of its preliminary chip manufacturing agreement with Apple Inc (NASDAQ: AAPL).
This marks a seismic shift for Intel Foundry – suggesting the semiconductor giant is about to sign on a high-volume, high-profile mobile customer it has chased for years.
However, Bank of America analysts led by Vivek Arya remain rather unimpressed, reiterating their “underperform” rating on Intel stock and setting a $96 price target, signaling significant downside from current levels.
Why BofA remains dovish on Intel stock
In his latest research note, Arya acknowledged the strategic importance of Intel’s partnership with the iPhone maker.
But he still favoured caution because the stock’s parabolic rally has already priced in the best-case scenario for the Apple transaction.
According to the BofA analyst, the partnership could ultimately deliver about $10 billion in yearly foundry sales, assuming Intel secures around 25% of the giant’s semiconductor production volume.
But he maintained an “underperform” rating on INTC stock, noting that “the upside is already fully valued.”
Arya further cautioned that AMD and ARM are better situated to capitalize on the expanding server CPU marketplace, which he believes will achieve $120 billion by 2030.
Insiders have been selling INTC shares
Beyond the Apple partnership, insider activity offers a dovish signal for Intel shares as well.
April Miller Boise – Intel’s executive VP and chief of legal affairs has recently trimmed her stake by 28%, selling roughly $4 million worth of company shares at nearly $100 each.
Boise’s transaction marked the most substantial insider divestment at INTC in the trailing 12 months.
Notably, the divestment occurred at a valuation significantly below Friday’s closing price of about $125.
Although insider sales occur for various personal reasons, such activity is typically interpreted as a bearish indicator, especially when the sale price is considerably below subsequent trading levels.
As of writing, Intel executives control roughly 0.08% of the corporation, and no company insider has acquired shares during the past three months, reinforcing that those closest to the business see INTC as “overvalued” at current levels.
How to play Intel at current levels
While the Apple deal provides a long-term roadmap, Bank of America remains dovish also because of “insufficient details regarding contract specifics.”
Its analysts see a two-to-three-year period required for capital investment, production qualification, and manufacturing scale-up before the partnership bears fruit.
In the immediate future, gross profit margin is anticipated to suffer.
Equipment depreciation, lower production yields, and launch-related expenses for the M-Series processors will pressure bottom-line results.
In short, BofA’s research team believes Intel’s target of achieving foundry operating profitability by 2027 may be delayed by one to two years.
Ultimately, while INTC has captured the market’s imagination, the path to converting this initial agreement into consistent earnings remains fraught with execution risk.
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