#1 Intel Stock Drops as Chipmaker Forecasts Loss
Earnings and Sales Miss Wall Street Targets
Intel stock tumbled on Friday after the chipmaker missed Wall Street’s targets for the fourth quarter and guided much lower than expected for the current period. The Santa Clara, California-based company late Thursday said it earned an adjusted 10 cents a share on sales of $14.04 billion in the December quarter. Analysts polled by FactSet had expected earnings of 21 cents a share on sales of $14.49 billion. On a year-over-year basis, Intel earnings plummeted 92% while sales dropped 28%.
For the current quarter, Intel expects to lose an adjusted 15 cents a share on sales of $11 billion. That’s based on the midpoint of its guidance. Wall Street was expecting earnings of 25 cents a share on sales of $13.93 billion in the first quarter. In the same quarter last year, Intel earned 87 cents a share on sales of $18.35 billion.
“Despite the economic and market headwinds, we continued to make good progress on our strategic transformation in Q4,” said Chief Executive Pat Gelsinger in a news release. He added, “In 2023, we will continue to navigate the short-term challenges while striving to meet our long-term commitments, including delivering leadership products anchored on open and secure platforms, powered by at-scale manufacturing.”
Weak PC Sales, Production Problems, and Market Share Losses to AMD
via /Refinitiv Datastream
Intel’s PC chip unit saw sales drop 36% to $6.6 billion in the fourth quarter. Its data center chip unit posted a 33% decline in sales to $4.3 billion in the December quarter. The company has struggled as it deals with weak PC sales, production problems, and market share losses to rival AMD (AMD).
Barclays analyst Blayne Curtis said in a note to clients that “it’s hard to formulate any sort of bull case with a struggling (product) roadmap, sinking gross margins, and negative free cash flow.” He reiterated his equal weight, or neutral, rating on Intel stock.
Impact on Intel Stock
Meanwhile, Intel spinoff Mobileye (MBLY) posted better-than-expected results for the fourth quarter. The maker of computer vision for advanced driver-assistance systems and autonomous vehicles said its revenue jumped 59% year over year to $565 million. Adjusted earnings rose 110% to 27 cents a share.
Weak Intel Stock Performance and Rating
Intel stock ranks No. 21 out of 32 stocks in IBD’s semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a weak IBD Composite Rating of 15 out of 99. Bernstein analyst Stacy Ragson, who has an underperform rating on Intel (INTC), called the level of deterioration for the financial results “stunning” and became concerned for the company’s cash position. He added that with Intel (INTC) likely to start burning through cash, “it seems reasonable to think that investors should at least start thinking about the security” of the chip giant’s dividend payments.
The company also expects gross margins to fall below 40%, coming in at 39%. Analysts expect the company to earn 25 cents a share, on $13.96B in sales, and gross margins of 45.5%. KeyBanc Capital Markets analyst John Vinh said the results from the PC and data center went from “bad to worse,” as AMD (AMD) continues to take market share. He also forecast “incremental weakness” in its data center business across areas like the enterprise and China.
Struggles with Weak PC Sales, Production Problems, and Market Share Losses to AMD
In conclusion, Intel’s fourth-quarter results and first-quarter forecast were a disappointment for investors, as the company struggles with weak PC sales, production problems, and market share losses to rival AMD.
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