Intel (INTC) faces a "long and challenging turnaround" amid product issues as Intel 7 is expected to be supply-constrained for the foreseeable future, Morgan Stanley said in a note on Friday.

"Intel 7 is three years old, and should be superceded by products on Intel 4 and Intel 3 if not now, then very soon," Morgan Stanley said, noting that Intel's older technology is selling out due to high prices on newer chips.

The investment firm raised concerns over the mix shift towards the company's older process, saying "product innovation is not yet where it needs to be."

Morgan Stanley also noted Intel's weak Q2 guidance but welcomed the conservatism due to uncertainties related to US tariffs.

Intel said it expects Q2 adjusted EPS at breakeven on revenue of $11.2 billion to $12.4 billion.

Morgan Stanley lowered its price target on Intel stock to $23 from $25, with an equal-weight rating.

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