Intel stock drops as signs of continued AMD share gains eclipse earnings beat

2 months ago 12
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Intel Corp. shares dropped Friday arsenic astir a 3rd of the analysts covering the banal chopped their terms targets pursuing a beardown net study that did small to distract from the advances of smaller rival Advanced Micro Devices Inc.

Intel INTC, -6.46% reported quarterly results that blew the doors disconnected its ain and analysts’ estimates connected Thursday, but its outlook amid a planetary spot shortage conscionable hardly cleared what Wall Street had expected. Shares fell arsenic overmuch arsenic 6% successful Friday greeting trading, tracking for their worst time since the banal dropped 9% pursuing a beardown net study six months ago. In comparison, the PHLX Semiconductor Index SOX, +0.20% was up astir 1% Friday.

Many analysts agreed that a diminution of lone 9% successful Intel’s data-center group, oregon DCG, gross to $6.5 cardinal was really bully news, due to the fact that analysts expected a steeper driblet to $5.84 billion, though the spot shaper was inactive losing marketplace stock to AMD AMD, +0.66%. The atrocious news, different than an unimpressive outlook amid a planetary spot shortage, was that Intel’s translation backmost to an undisputed person successful the semiconductor manufacture inactive appeared to beryllium a semipermanent extremity with small clarity connected short-term progress.

Read: Intel appears to beryllium feeling the competitory vigor from AMD

In a enactment titled, “Sometimes a cleanable bedspread hides soiled sheets,” Bernstein expert Stacy Rasgon said that portion Intel’s full-year guidance was raised a spot — to net of $4.80 a stock connected gross of $73.5 cardinal from $4.60 a stock connected gross of $72.5 cardinal — it inactive suggested a usher down for the 2nd fractional of the year.

“And pulling backmost the 2H covers suggests the furniture is messier than it appears astatine archetypal glance, with debased Q4 [gross margins] and Q4 net that look (as acold arsenic we tin tell) boosted by hundreds of millions of dollars’ worthy of non-op gains (we deliberation arsenic overmuch arsenic $700M, or~8 cents), suggesting normalized EPS importantly beneath expectations,” wrote Rasgon, who has an underperform standing and a $43 people terms connected Intel shares.

“At this point, Intel’s outlook for 2022 & beyond remains thing of a achromatic box, 1 we volition get nary clarity connected until the Nov. expert day,” Rasgon wrote.

Intel’s capitalist gathering is presently scheduled for Nov. 18. The institution is besides holding an “Intel Accelerated” lawsuit connected Monday, wherever it plans to supply updates connected its spot processes and packaging.

Cowen expert Matthew Ramsay, who has an outperform standing and a $80 terms target, conceded it is “still precise aboriginal successful the Intel battleship turnaround,” and that shares would beryllium “range bound” until we get person to November.

“Still, beardown PC numbers and amended than expected DCG maturation were positives, but capableness constraints are limiting further near-term upside, arsenic are AMD stock gains,” Ramsay said.

“CEO Pat Gelsinger believes some marketplace stock and pricing volition stabilize successful 2H21,” Ramsay said. “We hold connected the latter, but proceed to spot AMD gaining stock initially astatine hyperscale unreality customers and precocious successful the endeavor server marketplace arsenic well.”

Read: Why spot stocks are falling contempt semiconductor shortage, beardown aboriginal earnings

Sticking with the still-lots-to-do metaphors, Evercore ISI expert C.J. Muse, who has an in-line standing and chopped his terms people to $60 from $75, said there’s “still tons of wood to chop” astatine Intel.

“Moving to DCG, the bully quality was E&G/Cloud drove upside for the June Q with maturation expected sequentially into some 3Q and 4Q starring to a instrumentality to treble digit Y/Y growth,” Muse wrote. “The atrocious quality was that DCG [operating margins] fell to 30% successful the Q, highlighting meaningful contention from AMD.”

“Put it each unneurotic and determination stay galore unanswered questions, peculiarly arsenic it relates to the company’s manufacturing roadworthy map, execution of silicon designs vs. some AMD and ARM, and quality to physique a profitable and highly scalable foundry business,” Muse noted.

Citi Research expert Christopher Danley, who has a clasp standing and chopped his terms people to $57 from $60, expects borderline unit to proceed arsenic request for chips from the PC markets slows.

“We judge antagonistic catalysts specified arsenic push-outs from the PC extremity marketplace and little margins owed to stock nonaccomplishment to AMD volition effect successful reductions to statement estimates and offset Intel’s charismatic valuation,” Danley said. “We judge Intel’s gross margins could dip to the 40s owed to stock nonaccomplishment to AMD and a correction successful the PC extremity market.”

Full net coverage: Intel says spot shortage could resistance into 2023 arsenic outlook hardly clears Street view

Over the past 12 months, Intel banal has fallen much than 12%. Over the aforesaid period, the Dow Jones Industrial Average  DJIA, +0.56% — which counts Intel arsenic a constituent — has gained 32%, the S&P 500 scale SPX, +0.86% has climbed 36%, the tech-heavy Nasdaq Composite Index  COMP, +0.84% has precocious 41%, and the PHLX Semiconductor Index has surged 58%.

Of the 41 analysts who screen Intel, 14 person bargain ratings, 17 person clasp ratings, and 10 person merchantability ratings. Of those, 13 trimmed their terms targets, resulting successful an mean people terms of $62.71, down from a erstwhile $64.92, according to FactSet data.

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