Overall PC demand weakness isn’t helping Intel either, Sur added. Multiple tech companies have cited demand weakness for personal computers, including AMD and Microsoft MSFT (MSFT) in their latest earnings reports.
“The PC/server compute market is anticipated to be weak over the next 12 months with PC units down 14% in 2022/2023,” Sur said, citing J.P. Morgan research. He added that this will be a further pressure on Intel’s financials and continue to be an overhang on the stock as the market continues to be concerned over the sustainability of dividend payments.
Intel declined to comment on individual analyst opinions, but referred Barron’s to recent statements made by management during the company’s latest earnings release.
“Despite the worsening economic conditions, we delivered solid results and made significant progress with our product and process execution during the quarter,” Pat Gelsinger, Intel CEO, said in the company’s third-quarter earnings report. “To position ourselves for this business cycle, we are aggressively addressing costs and driving efficiencies across the business to accelerate our IDM 2.0 flywheel for the digital future.”
Intel has underperformed the broader markets this year, which also discourages Sur. Coming into Friday trading, the stock has fallen 43% in 2022 while the S&P 500SPX has declined 17%. Shares of Intel were down 0.4% Friday to $29.64.
“Given the market has time to gain confidence on Intel’s ability to execute in its core compute and diversification initiatives, we believe Intel will be an underperformer relative to the group over the next 12 to 18 months,” Sur said.
Write to Angela Palumbo at angela.palumbo@dowjones.com