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Intel (INTC - Free Report) is a Zacks Rank #5 (Strong Sell) that engages in the design, manufacture, and sale of computer products and technologies worldwide.
The stock has come under hard times as loss of market share and an earnings miss has brought INTC to five-year lows. Now investors are struggling with the idea if lower prices as the Intel's peers see relief.
About the Company
Intel is headquartered in Santa Clara, CA. The company was founded in 1968 and employs over 120,000.
Intel offers platform products, such as central processing units and chipsets, and system-on-chip and multichip packages; and non-platform or adjacent products, including accelerators, boards and systems, connectivity products, graphics, and memory and storage products.
INTC is valued at $148 billion and has a Forward PE of 15. The company holds a Zacks Style Score of “C” in Value, but “F” in Growth. The stock pays out a dividend of 4%.
Q1 Earnings
The company reported EPS in late July, seeing a miss of 58%. This was the first miss since 2014, so investors were not happy with the quarter and sold the stock to new 2022 lows.
Looking at the quarter, Q2 came in at $29 cents v the $0.69 cents expected. Revenues were a big miss, with Intel reporting $15.3B vs the 17.9B expected.
To make matters worse, the company slashed their outlook.
The Q3 guide came in at $0.35 v the $0.90 expected. Revenues are seen at $15.16B v the $18.9B previous.
Intel also cut their FY22 outlook to $2.30 v the previous $3.46. With that, the company cut Capex.
Margins were an issue, coming in at 44.8% v the 59.8% last year. The Client Computing group was down 25% y/y, while Data Center Group was off 16%.
Intel management said “The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues”.
Estimates
With the big miss on earnings and the big cut in the outlook, estimates for Intel are dropping rather quickly.
Over the last seven days, we have seen numbers go down across the board. For the current quarter, estimates have fallen from $0.90 to $0.40, or 55%. For the current year, they have fallen from $3.43 to $2.36, or 31%.
This drastic drop in earnings estimates is forcing analysts to drop price targets as well. After earnings, Wedbush dropped their targets from $44 to $35. Morgan Stanley also cut had a similar cut, dropping from $46 to $36
Technical Take
Looking at the chart, there isn’t much to like. The stock is now trading at the 2017 spot where it sat before it broke out. There is a good chance that the stock is dead money until there is a proven turn around in the fundamentals.
The $35 area could hold up if the market can rally. But if we get some more weakness, look out for the support levels at $30.50, $28 and even $20.
In Summary
There are other tech and semiconductor names that are performing well as the market starts to rally off 2022 lows. After the current earnings report, investors should shift their focus elsewhere.
For now, a better option in the sector might be STMicroelectronics (STM). The stock is a Zacks Rank #1 (Strong Buy) that is coming off a 13% EPS beat.
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Bear of the Day: Intel (INTC)
Intel (INTC - Free Report) is a Zacks Rank #5 (Strong Sell) that engages in the design, manufacture, and sale of computer products and technologies worldwide.
The stock has come under hard times as loss of market share and an earnings miss has brought INTC to five-year lows. Now investors are struggling with the idea if lower prices as the Intel's peers see relief.
About the Company
Intel is headquartered in Santa Clara, CA. The company was founded in 1968 and employs over 120,000.
Intel offers platform products, such as central processing units and chipsets, and system-on-chip and multichip packages; and non-platform or adjacent products, including accelerators, boards and systems, connectivity products, graphics, and memory and storage products.
INTC is valued at $148 billion and has a Forward PE of 15. The company holds a Zacks Style Score of “C” in Value, but “F” in Growth. The stock pays out a dividend of 4%.
Q1 Earnings
The company reported EPS in late July, seeing a miss of 58%. This was the first miss since 2014, so investors were not happy with the quarter and sold the stock to new 2022 lows.
Looking at the quarter, Q2 came in at $29 cents v the $0.69 cents expected. Revenues were a big miss, with Intel reporting $15.3B vs the 17.9B expected.
To make matters worse, the company slashed their outlook.
The Q3 guide came in at $0.35 v the $0.90 expected. Revenues are seen at $15.16B v the $18.9B previous.
Intel also cut their FY22 outlook to $2.30 v the previous $3.46. With that, the company cut Capex.
Margins were an issue, coming in at 44.8% v the 59.8% last year. The Client Computing group was down 25% y/y, while Data Center Group was off 16%.
Intel management said “The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues”.
Estimates
With the big miss on earnings and the big cut in the outlook, estimates for Intel are dropping rather quickly.
Over the last seven days, we have seen numbers go down across the board. For the current quarter, estimates have fallen from $0.90 to $0.40, or 55%. For the current year, they have fallen from $3.43 to $2.36, or 31%.
This drastic drop in earnings estimates is forcing analysts to drop price targets as well. After earnings, Wedbush dropped their targets from $44 to $35. Morgan Stanley also cut had a similar cut, dropping from $46 to $36
Technical Take
Looking at the chart, there isn’t much to like. The stock is now trading at the 2017 spot where it sat before it broke out. There is a good chance that the stock is dead money until there is a proven turn around in the fundamentals.
The $35 area could hold up if the market can rally. But if we get some more weakness, look out for the support levels at $30.50, $28 and even $20.
In Summary
There are other tech and semiconductor names that are performing well as the market starts to rally off 2022 lows. After the current earnings report, investors should shift their focus elsewhere.
For now, a better option in the sector might be STMicroelectronics (STM). The stock is a Zacks Rank #1 (Strong Buy) that is coming off a 13% EPS beat.