Intel Set to Exceed Estimates Despite Elevated Valuation Risk

Wedbush Securities anticipates that Intel Corporation will deliver results substantially above second quarter consensus estimates when the company reports on Thursday. The investment bank has nevertheless maintained a neutral rating and $60 price target on the semiconductor manufacturer, citing concerns that the shares remain vulnerable to broader market sentiment shifts rather than fundamental performance metrics.

The price target represents a 37 per cent discount to the current share price of $95. Wedbush has based its valuation on approximately 40 times its 2027 earnings per share estimate of $1.53, a multiple the firm acknowledges sits considerably above both Intel’s historical trading range and its sector peers.

The broker expects both revenues and margins to exceed consensus projections, with data centre demand and pricing dynamics providing the primary catalysts. Wedbush forecasts data centre sales to increase approximately 10 per cent quarter on quarter and 40 per cent year on year, supported by double-digit growth in average selling prices during the period. This follows similar pricing increases in the first quarter, with reports suggesting another round of price rises has been implemented in the current period.

Pricing for personal computer chips appears to be following a similar trajectory, which should underpin modest revenue growth despite a challenging backdrop characterised by slowing PC production and cost-driven demand weakness.

Regarding profitability metrics, Intel had previously guided for a decline in second quarter margins due to a one-off benefit from selling salvaged chips and the production ramp of its 18A process. Wedbush now expects margins to come in well ahead of company guidance, as pricing improvements and faster than anticipated yield enhancements take effect.

The broker cautioned that strong financial results may prove insufficient to support the current valuation. Wedbush referenced Taiwan Semiconductor Manufacturing Company as an example, where a substantial earnings beat and sales reacceleration failed to prevent a broader semiconductor sector sell-off. Contributing factors included concerns over Chinese advances in artificial intelligence, geopolitical tensions between the United States and Iran, inflationary pressures on interest rates, and questions surrounding hyperscaler returns on data centre capital expenditure.

Wedbush suggested Intel may be better positioned to navigate some of these concerns, particularly as China continues to require computing capacity for inference workloads. However, with Intel trading at a valuation well above historical norms and industry comparables, the firm believes the stock is arguably more exposed to broad-based market volatility than peers such as Taiwan Semiconductor or Nvidia.

The broker anticipates that earnings estimates will move materially higher, with potential operating cost reductions following another round of workforce reductions likely to provide additional support.