Intel Corporation (INTC): Top Analyst Forecasts Modest Impact from Potential AAPL Shift to Insourced Processor Solutions

Intel Corporation (NASDAQ:INTC) investors got cold feet, sending shares tumbling nearly 6% in Monday’s trading session. The reason? According to a new Bloomberg report, citing sources with knowledge of the matter, Apple (NASDAQ:AAPL) is looking to replace processors made by Intel with its own, custom-built chips beginning as early as 2020. The project, reportedly code-named “Kalamata,” is still in its very early stages, but the aim is to make Macs work better in concert for iPhones and iPads. Bloomberg says it will “result in a multi-step transition,” so you won’t see every device get Apple’s new processors anytime soon.

RBC’s top analyst Amit Daryanani commented, “Assuming the report is accurate, an internally developed processor solution would likely displace INTC-based x86 processor solutions currently in the Mac product line. We think that this initiative, referred to as “Kalamata,” remains in the early developmental stage. At first glance, we believe this potential content loss could represent ~$0.20-0.25 annual EPS headwind assuming INTC loses all of its processor allocation within Mac computers. Longer term, we think AAPL’s recent insourcing initiatives (GPU, PMIC, and modem) could also create business impacts for the broader supply chain.”

Bottom line: “We think AAPL’s potential shift to in-house designed Mac processors could create a modest impact for INTC depending on the magnitude and timing of the transition.”

Subsequently, Daryanani reiterates a Sector Perform rating on Intel, with a price target of $46, which implies a downside of 6% from current levels.

Daryanani’s picks have a 28% one-year average return with a 85% success rate, according to analyst ranking service TipRanks, placing him in the top 15 Wall Street analysts covering any industry.

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