Analysts rush to downgrade Intel stock after another disappointing report

Bank of America analysts cut their rating on Intel (NASDAQ:) stock from Neutral to Underperform after the chipmaker’s disappointing Q2 report sent its shares tumbling more than 20% in Friday’s premarket.

The company announced it has suspended its dividend and anticipates a loss in the third quarter, following Q2 results that fell short of expectations due to margin pressures. The dividend suspension will begin in Q4.

For Q2, Intel reported adjusted earnings of $0.02 per share on revenue of $12.83 billion, missing Wall Street estimates of $0.10 per share and $12.93 billion. The company’s gross margin declined by 0.4% to 35.4%.

Looking ahead to Q3, Intel forecasted an adjusted loss of $0.03 per share on revenue between $12.5 billion and $13.5 billion, which is below analyst estimates of $0.31 per share on revenue of $14.39 billion.

It also projected its gross margin to fall to 34.5% in Q3 and announced plans for significant cost-cutting measures, including reducing its headcount by more than 15% to resize and refocus.

In response, analysts downgraded the stock, primarily due to a weak Q3 outlook and profitability challenges that are expected to continue into the 2026 fiscal year.

The firm pointed to several key issues facing Intel, including its Integrated Device Manufacturer (IDM) structure, which is seen as less equipped to compete with focused competitors like NVIDIA Corporation (NASDAQ:), Advanced Micro Devices, Inc. (NASDAQ:), and Taiwan Semiconductor Manufacturing Company (TSM).

The bank also noted Intel’s lack of competitive AI accelerators, which is believed to be diminishing its relevance to critical cloud customers. Additionally, analysts highlighted that Intel’s large-scale restructuring, involving a 15% reduction in headcount and cuts to capital expenditures, “could create unintended competitive consequences.”

Another factor contributing to the downgrade is the suspension of Intel’s dividend, which could potentially make the stock less attractive to certain investors.

As a result of these concerns, analysts have significantly reduced its earnings per share (EPS) forecasts for Intel for the fiscal years 2024, 2025, and 2026. The EPS estimates have been cut by 75%, 44%, and 29%, respectively, to $0.27, $0.93, and $1.51.

The bank’s analysts have also lowered its price objective (PO) for Intel’s stock to $23 from the previous target of $35.

Separately, HSBC analysts also downgraded Intel stock to Reduce from Hold, citing a “head-scratching 2Q24 margin miss and equally disappointing 3Q24 guidance.”

“Intel management is guiding for above seasonal 4Q24 recovery given much weaker 3Q24 base and remains bullish about product roadmap as well as its long-term strategy in foundry business model,” analysts said.

“However, any guidance or focus on cost reductions and capex cuts will be overshadowed by lack of investor confidence which will take some time restore,” they added.