Deutsche Bank resumes coverage of Intel

Investing.com -- Deutsche Bank resumed coverage of Intel (NASDAQ:INTC) with a Hold rating and a price target of $23 in a note Wednesday, noting cautious optimism about the company’s long-term potential under new CEO Lip-Bu Tan, while warning that a meaningful turnaround will take time.

According to Deutsche Bank (ETR:DBKGn), “Patience will still be required” as Intel navigates through “macro uncertainties and co-specific headwinds from elevated manufacturing costs (internal&external) and lack of leadership products.”

The firm expressed confidence in Tan’s leadership, writing that his “technological acumen, customer-centric approach and conservative communication strategy increase the odds of INTC achieving a successful turnaround.” 

However, Deutsche Bank emphasized that the formal details of his strategic vision remain “TBD.”

In the near to medium term, Intel’s outlook remains clouded, according to the bank. 

Deutsche Bank expects the company’s revenue and profitability to continue facing pressure due to operational challenges and ongoing investments in its manufacturing and foundry efforts. 

“The path to meaningful EPS/FCF generation remains cloudy and highly dependent on a turnaround in the co’s Foundry business (no small feat),” said the firm.

Despite recent cost-cutting measures, the bank believes that only a successful restructuring of Intel’s manufacturing processes, product roadmap, and customer wins in its foundry business will unlock long-term upside. 

Deutsche Bank estimates earnings per share could reach approximately $2 by 2027 if Intel achieves those goals.

While acknowledging that Intel’s direction is “on track,” the firm noted progress has been slower than hoped. “INTC has clearly stated, there are no quick fixes,” Deutsche Bank said.

The bank said it is holding back from a more bullish stance until “learning greater details surrounding the new CEO’s strategic vision and/or seeing more tangible evidence of the company’s turnaround.”