Intel upgraded at Raymond James as downside risk baked into the stock
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Intel (NASDAQ:INTC) is getting some positive commentary from Wall Street, as Raymond James upgraded the stock on valuation, following a 30% decline since the firm downgraded the semiconductor giant in early 2021.
Analyst Christopher Caso raised his rating to market perform from underperform, noting that even though Intel management has guided to no free cash flow for the next few years as it attempts to compete with the likes of Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA) and others that have surpassed it, even in an industry downturn, "weâre not confident that the stock would meaningfully underperform further."
"The path to [process superiority] is very long and expensive, and the outcome remains uncertain at best," Caso wrote in the note to clients. "In the meantime, investing now for a potential 2025 recovery likely means investing through an eventual downturn, which remains a big ask for investors."
Intel shares were up slightly more than 1% to $45.20 in premarket trading on Wednesday.
In addition, Caso noted that even if there was an industry downturn between now and 2025, it could be difficult for Intel to get back to positive free cash flow, but if investors are confident in that time frame, any downturn in the industry "would present a better opportunity to own the stock." 
At Intel's investor day, the Pat Gelsinger-led company said it expects profit margins to decline in 2022 and hold steady due to heavy investments, before climbing once again in 2025.
Intel (INTC) also said revenue would rise 1.7% to $76 billion in 2022, grow in mid-to-high single-digit percentage point growth in 2023 and 2024, before 10% to 12% gains in 2025 and 2026.
Gelsinger also said that adjusted free cash flow is expected to be negative $1 billion to $2 billion as the company ramps its investments to accelerate long-term growth.
Nonetheless, Caso said that he expects AMD to continue gaining market share even if Intel makes progress on its roadmap, though "the prevailing bull case on Intel now is that it will finally make some incremental progress on its roadmap, which will arrest and reverse AMDâs share gains." 
Separately at its investor day, Intel (INTC) said that it would be interested in participating if a consortium emerges to own the British semiconductor and software design company Arm.