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Chipmaker Intel Corporation's shares were slightly up in premarket trading after investment bank Citi cautioned that short sellers could experience losses after the firm's second quarter results. Intel's shares have gained roughly 13% year-to-date as new CEO Lip-Bu Tan undertakes a turnaround effort at the firm. The investment bank kept a $24 share price target and a Neutral rating for Intel's stock, indicating that Intel could post EPS upside in its upcoming earnings.
Citi Expects Upside From Intel's PC Market In Q2
Throughout this year, investor and analyst attention has focused on Lip-Bu Tan's efforts to streamline Intel's affairs. Intel has been spinning off businesses and laying off employees as part of a bid to reduce costs, while reports have also suggested that the firm might forego offering its leading-edge 18A chip manufacturing process to external customers through its foundry business.
Investors are also focused on Intel's profitability, especially since the firm posted a loss last year and maintained the trend with its first quarter earnings. The bearishness surrounding Intel's affairs has also stimulated short seller interest in the firm. Data from the NASDAQ exchange shows that as of June 30th, 128 million Intel shares were sold short, which marked a sizable growth from the 94.9 million shares sold short during July 2024.
On this front, investment bank Citi released a new note today in which it remarked that Intel's short sellers could be squeezed out of their positions after the firm's upcoming second quarter earnings report.
Analyst Christopher Danely reiterated a $24 share price target and a Neutral rating for Intel's stock but added that the firm's upcoming second quarter results could generate positive EPS upside. The analyst notes that Intel's cost-cutting initiatives could be behind the upside as they help the firm to bolster its bottom line figures. Lower capital and operating expenditures are two key metrics mentioned by Danely.
Intel's CEO, Lip-Bu Tan, aims to fire as many as 2,500 employees in Oregon alone, according to a recently published WARN notice, while the firm has also spun off its robotics business and reportedly cancelled next-generation chip manufacturing technologies such as glass substrates.
Additionally, the other driving factor behind potentially strong second-quarter performance could be the PC market, according to the Citi analyst. Danely believes that Intel could experience PC market upside for a major win in a market that represents 60% of the firm's revenue. As a result, while Citi notes that Intel is the most shorted stocks among investors that it spoke with, the short sellers could experience a squeeze if the firm surprises to the upside.
While problems with semiconductor fabrication have led Intel to bleed market share to smaller rival AMD, the firm is nevertheless the largest PC chip manufacturer and designer in the world. Along with the PC market, analysts and investors will also focus on Intel's enterprise computing and server business, which has exhibited greater struggles against AMD when compared to the PC industry. Intel's shares gained less than a percent after Citi's report.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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