Investing.com -- HSBC upgraded Intel (NASDAQ:INTC) from Reduce to Hold in a note Tuesday, citing limited downside after a correction in the stock.
Since Intel's second-quarter 2024 earnings release, the stock has dropped about 26%, while the PHLX Semiconductor index gained 9%.
HSBC notes that the stock has now met its target price of $20, suggesting it is fairly priced amid ongoing uncertainties.
"We believe the market has priced in the recent uncertainties relating to the execution of the IDM 2.0 strategy as well as top management attrition with CEO Pat Gelsinger resigning in December 2024," HSBC analysts stated.
Intel's upcoming fourth-quarter 2024 earnings are expected to align with market expectations. HSBC forecasts revenue of $13.8 billion, within the guidance range of $13.3 billion to $14.3 billion, matching the consensus estimate.
However, the outlook for the first quarter of 2025 appears less optimistic, according to the bank.
HSBC anticipates a 9% quarter-on-quarter revenue decline, below the consensus estimate of a 6% decline, largely due to potential weakness in the datacenter segment.
"Going into 1Q25e, we believe there could be some downside to revenue," the analysts wrote, adding that they expect this to pressure Intel's gross margin, which they estimate at 38.5%, below the consensus of 39.1%.
HSBC also highlighted ongoing concerns about Intel's foundry strategy. "While we do acknowledge that the worst seems to be over for Intel... it still remains early to have a clear view on its execution leading to overall recovery of the business."
Despite revising their 2025 EPS estimate from $1.19 to $1.04, HSBC maintains a target price of $20, reflecting limited downside. "We wait for clear signs of recovery before we turn bullish on the stock," the analysts concluded.