Justin Sullivan
Intel (NASDAQ:INTC) has staked much of its future on the success of its foundry business as it seeks to become a viable competitor to Taiwan Semiconductor (TSM) and Samsung (OTCPK:SSNLF). And although investors have turned Increasingly optimistic about the company's advances in foundry, artificial intelligence and other areas, there may be more upside to come.
Even if it's not all together.
Northland Capital Markets analyst Gus Richard, who has an Outperform rating on Intel (INTC), believes the Pat Gelsinger-led company could eventually split into five separate companies (Mobileye, Altera, Foundry, IMS Nanofabrication and Products). with the sum of the parts. with a value of 68 dollars per share.
At that valuation, Intel (INTC) would be worth about 50% more than the price the stock ended at on Friday.
“These individual companies are likely worth more than the combined entity,” Richard wrote. “The issue, in our opinion, is the timing of each spin-off.”
Mobileye vs Altera
Richard believes the remaining value of Intel's (INTC) position in Mobileye (MBLY), which it spun off a portion of in October 2022, could be worth up to $30 billion.
Its programmable solutions group (formerly known as Altera) could be worth $12 billion, or about five times trailing 12-month revenue.
In October, Intel announced its intention to separate its PSG operations into a standalone operation, effective January 1, in an effort to continue simplifying its broader business.
The PSG Group, responsible for Intel's push into high-performance communications and data center applications, will be led by Sandra Rivera when it becomes an independent company. Currently, Rivera is the general manager of Intel's ai and data center group.
Foundry, foundry, foundry
The third part would be the independent foundry, which Richard says could end up being the second largest in the world, behind Taiwan Semiconductor (TSM).
“Intel will likely be the only viable alternative to TSMC at the forefront, particularly for high-performance applications such as ai Asics, CPUs, GPUs and FPGAs,” Richard wrote. It estimated it had internal manufacturing revenue this year of about $20 billion, so at five times revenue (a similar multiple for Taiwan Semiconductor, GlobalFoundries (GFS) and United Microelectronics (UMC)) the foundry business could be worth 100 billion dollars.
Richard spoke about Intel's 18A foundry process technology, which has led to several customer wins, as well as 18A PDK 0.9, which he said is “an essential milestone in (Intel's) evolution as a foundry.”
He also said that packaging is starting to become a differentiator: Intel added two packaging customers in the third quarter and has six more in the pipeline.
IMS Nano
Additionally, Santa Clara, California-based Intel sold about 30% of its IMS nanofabrication business to two partners (Bain Capital in June and Taiwan Semiconductor in September) at a valuation of about $4.3 billion.
Product return?
Lastly, Intel's (INTC) products business appears to be improving, especially if PCs recover in 2024 and the company stabilizes its market share in both PCs and servers.
“We expect INTC to regain leadership in process technology in (2025) and, as a result, market share in servers and PCs should, at a minimum, stabilize,” Richard wrote, noting that 2025 will likely be a “strong year” for PCs, driven in part by the infusion of ai.
Richard noted that Intel (INTC) products, excluding the foundry, Mobileye and Altera, generated $49 billion in revenue this year. As a stand-alone company without factories, it could be worth up to $147 billion, or about three times revenue, not including the $90 billion in property, plant and equipment on the balance sheet.
