Analyst Note
| Abhinav Davuluri, CFA |We are lowering our moat rating for Intel to narrow from wide, as we are no longer certain that the firm can generate excess returns on capital over the next few years. In concert with our moat rating downgrade, we are lowering our fair value estimate for Intel to $50 per share from $56 per share, as we reduce the time frame we expect Intel to generate excess returns on invested capital with certainty. Our moat downgrade concedes that Intel’s recent financial performance and execution was worse than our prior expectations. However, our outlook for Intel has not materially changed, as we remain positive on Intel’s IDM 2.0 strategy to get its manufacturing back on track (which will support more competitive products). We still view shares as undervalued for long-term, patient investors but acknowledge that the next several quarters will be highly tumultuous for the firm.