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

Friday also marked the questionable disparity of Intel’s fifth straight quarter, where shares closed down 5% or more for the day following an earnings report.

Many analysts agree that a 9% drop in Intel’s data center group, or DCG, in revenue to $6.5 billion is actually good news, because analysts expected a decline. stronger to $5.84 billion, although the chipmaker is still losing market share to AMD
AMD,
+ 1.03%.
The bad news, aside from an unimpressive outlook amid a global chip shortage, is that Intel’s return to the undisputed lead in the semiconductor industry still seems to be a long-term goal with no clarity on what to expect. short-term progress.

Read: Intel seems to be feeling the competitive heat from AMD

In a note titled, “Sometimes a clean sheet hides dirty sheets,” said Bernstein analyst Stacy Rasgon while Intel’s full-year guidance has been slightly raised – earnings of $4.80 a share on revenue of $73.5 billion from $4.60 a share on revenue of $72.5 billion – it still recommends a bearish guidance for the second half .

“And pulling back on the 2H shell shows that the bed is cluttered than at first glance, with a low Q4. [gross margins] and Q4 earnings appear to be (as far as we can tell) driven by hundreds of millions of dollars in non-operating income (which we think could be as high as $700 million, or ~ 8 cents), showing a normal EPS significantly below expectations,” wrote Rasgon, who has an underperforming rating and a $43 price target on Intel stock.

“At this point, Intel’s outlook for 2022 and beyond remains something of a black box, one that we won’t know until November’s analysis date,” Rasgon wrote.

Intel’s investor meeting is currently scheduled for November 18. The company is also holding a “Intel Accelerated” event on Monday, where it plans to provide updates on its chip packaging and process.

Cowen analyst Matthew Ramsay, who has a better rating and an $80 price target, admits that it’s “still very early in Intel’s battleship turnaround,” and that the stock will be “range bound. en” until we get close to November.

However, strong PC numbers and better-than-expected DCG growth are positives, but capacity constraints are limiting near-term upside momentum, as well as equity returns, said Ramsay. AMD,” said Ramsay.

“CEO Pat Gelsinger believes both market share and prices will stabilize in the second half of 21,” Ramsay said. “We agree on the latter, but continue to see AMD gaining market share initially in the ultra-cloud customers and more recently in the enterprise server market.”

Read: Why chip stocks fall despite lack of semiconductors, first-year earnings surge

Sticking to the metaphors there’s still a lot of work to be done, Evercore ISI analyst CJ Muse, who has an internal rating and lowered his price target to $60 from $75, said Intel “still has room to stay.” lots of wood to cut.”

Moving to DCG, the good news is that E&G/Cloud drove growth in June Q with sequential expected growth in both Q3 and Q4 resulting in double-digit growth, Muse wrote. over the same period”. “The bad news is that DCG [operating margins] dropped to 30% in Q, indicating meaningful competition from AMD. “

“Take it all together and there are still many unanswered questions, especially as it relates to the company’s production roadmap, the implementation of silicon designs compared to both AMD and ARM, and the ability to build a profitable and highly scalable foundry business,” noted Muse.

Citi Research analyst Christopher Danley, who kept his rating and cut his price target to $57 from $60, expects margin pressure to continue due to demand for chips from the market. PC slows down.

“We believe that negative catalysts such as a boost from the PC market and lower margins due to the loss of shares to AMD will lead to a decrease in consensus estimates and offsetting Intel’s attractive pricing. “We believe Intel’s gross margin could decline to the 40s due to loss of market share to AMD and a correction in the final PC market.”

Full income insurance: Intel says chip shortage could last until 2023 as outlook barely erases Street View

Over the past 12 months, Intel stock has fallen more than 12%. During the same period, the Dow Jones Industrial Average
DJIA,
+0.68%

– which counts Intel as a component – rose 32%, the S&P 500
SPX,
+ 1.01%

rallied 36%, the tech-heavy Nasdaq Composite Index
COMP,
+ 1.04%

was up 42% and the PHLX Semiconductor Index was up 58%.

Of Intel’s 41 analysts, 14 have a buy rating, 17 have a hold rating, and 10 have a sell rating. Of those, 13 have slashed their price targets, resulting in an average target price of $62.71, down from $64.92, according to FactSet data.