Why Intel Stock Popped on Monday
Key Points
JP Morgan analyst Harlan Sur upgraded Intel stock to "neutral."
Intel's market share has eroded, but its turnaround is making progress.
Intel (NASDAQ:INTC) stock jumped 4.6% through 10:55 a.m. ET Monday.
You can thank the friendly analysts at JP Morgan for that -- because they no longer say Intel's a sell.
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Image source: Intel.
JP Morgan's Intel upgrade
JP Morgan analyst Harlan Sur removed his sell rating on Intel stock this morning, upgrading the semiconductor company from "underweight" to "neutral" -- essentially a shift from sell to hold. And why?
Intel stock is down 36% from its June peak and nearly 22% since the start of October. As Intel drifts ever closer to Sur's $85 target price, more and more risk gets squeezed out of the stock.
There's good reason for that, says Sur in a note covered today on StreetInsider.com: Intel's server CPU market share has dropped from 77% to 53%, and its PC CPU share has dropped from 81% to 68% -- and both those numbers are still falling. The company's foundry business isn't doing so hot, either, with only $1 billion in annualized sales to companies other than Intel -- not even a rounding error next to the $150 billion in annualized sales at archrival TSMC!
What's next for Intel stock
That's the bad news. The good news is that Sur sees at least some progress being made in foundries. He also thinks new CEO Lip Bu Tan is improving yields, manufacturability, and advanced packaging performance in CPUs destined for AI data centers.
As Intel's turnaround progresses, and as it enjoys a tailwind from demand for artificial intelligence chips, the risk-reward ratio on Intel stock improves. At the same time, many analysts predict Intel will finally turn profitable again next year -- giving the stock a positive P/E ratio that will make Intel stock appear more investable.
I personally think the risk here is still too high, but it's undeniable: The upgrade is giving Intel stock a lift today.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.