Major Investment Bank Alerts Intel Short Sellers of Potential Q2 Earnings Upside

Please note that this article does not constitute investment advice. The author holds no stock positions in the companies referenced.

Intel Corporation’s stock saw a modest increase in premarket trading following a cautious note from Citi Investment Bank. They suggested that short sellers might face potential losses due to Intel’s second-quarter performance. Year-to-date, Intel’s shares have surged approximately 13% as the company embarks on a revitalization journey under the leadership of new CEO Lip-Bu Tan. Citi has set a price target of $24 for Intel shares and maintained a Neutral rating, hinting at potential earnings-per-share (EPS) upside in the forthcoming reports.

Citi Anticipates Positive Outlook for Intel’s Q2 PC Market

Throughout this year, Lip-Bu Tan’s strategic initiatives aimed at refining Intel’s operations have captured the attention of both investors and analysts. The company is actively divesting non-core businesses and streamlining its workforce as part of an overarching strategy to control costs. Notably, there are indications that Intel may decide not to offer its advanced 18A chip manufacturing technology to external customers, which has been part of its foundry services.

Profitability is a critical focus for Intel, especially after last year’s losses and continued financial struggles evident in its first-quarter earnings. These challenges have spurred heightened interest from short sellers. According to NASDAQ data, by June 30, there were 128 million Intel shares sold short, a significant increase from 94.9 million in July 2024.

In a recent advisory, Citi highlighted the possibility of short sellers being compelled to close their positions following Intel’s second-quarter earnings report.

Silicon Wafer — A silicon wafer.(Image Source: Intel)

Analyst Christopher Danely reasserted the $24 price target, alongside a Neutral rating for Intel. He speculates that the upcoming earnings may reveal positive EPS surprises due to the cost containment strategies implemented by the company. He emphasized that reduced capital and operational expenditures are crucial metrics contributing to this potential upside.

Furthermore, based on a recently published WARN notice, it appears that CEO Lip-Bu Tan plans to eliminate around 2, 500 positions in Oregon alone. The company has also divested its robotics segment and reportedly halted developments on next-generation chip manufacturing technologies, including glass substrates.

Another factor contributing to a potentially robust second-quarter outcome could be the performance of Intel’s PC market segment. According to Danely, the PC sector, which accounts for 60% of Intel’s revenue, could be positioned for significant gains. This insight increases the likelihood of a short squeeze, especially since Citi observes that Intel remains among the most shorted stocks among investors.

Despite facing challenges in semiconductor fabrication that have allowed competitors like AMD to gain ground, Intel still holds the title of the largest manufacturer and designer of PC chips globally. Apart from the PC segment, market participants will also keep an eye on Intel’s enterprise computing and server divisions, which have faced stiff competition from AMD compared to the PC market. Following Citi’s report, Intel’s shares experienced a slight uptick of less than one percent.

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