Intel’s 85% Foundry Yield Could Ignite a Second-Half Rebound

It’s hard to believe that a name like Intel (NASDAQ:INTC | INTC Price Prediction), which gained more than 336% in a year as a part of its profoundly successful turnaround, could have more gas in the tank. The $515 billion semiconductor giant is back on the map, and while the easiest gains have already been made, I do think that the company could continue its winning ways now that its wheels are back on the tracks.

With shares now down more than 26% from those June highs, questions linger as to whether Intel deserves to fall faster than the rest of the harshly punished semiconductor names. Now that analysts expect way more from the firm after more than quadrupling in a year, questions linger as to whether the firm is poised to run itself off the expectations treadmill.

With investors expecting big things from the firm as it pulls the curtain on earnings today, Intel’s numbers may very well set the tone for the tech trade for the rest of the week. For the most part, the numbers are going to be “strong,” according to most analysts, including those at Wedbush Securities.

But a good showing might not be enough to reverse the trend as semis continue to sag and calls for profit-taking grow a bit louder. In my view, the long-term narrative has never been better, and any post-earnings plunge, I think, could be a gift for those willing to deal with the downward pressure for a shot at real long-term strength.

Intel’s yield is too impressive to ignore, and the margin implications are huge

With recent reports swirling around Intel Foundry Services clocking in an astounding 85% yield on the 18A process node, perhaps lingering doubts and skepticism — which are very much warranted, in my view — surrounding Intel’s ability to catch up with Taiwan Semiconductor Manufacturing (NYSE:TSM) could soon be shot down. It’s one thing to get a fab up and running with big-name clients, but it’s another to be running with a high yield on the cutting edge of semiconductor manufacturing.

The 85% figure is 20% higher than previous quarters, marking an unbelievable leap in efficiency, one that will go straight into padding Intel’s margin. Of course, Taiwan Semiconductor remains the firm to beat, but being able to operate at such a high level to be within striking distance of the market leader, in my opinion, is a feat that warrants a big jump in the share price.

In any case, we’ll need to see how the numbers fare in the second half. If an 85% yield on 18A finds its way into the numbers, analysts might need to revisit the drawing board and raise the bar on their margin expectations. Intel has defied expectations in a massive way in the past year.

Could it really be that Intel can keep the home run hits coming?

I’d say it’s likelier than not, especially in light of this latest report. At this pace, perhaps Intel stock is well-equipped to grow into its hefty multiple far faster than expected, and the bulls, like Jim Cramer, might look very smart for sticking with the name despite the explosive stock chart.

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