As its stock slumps 6%, are the chips down for Intel (INTC)?
14:55, 29 April 2022
A major chip maker’s stock was down by as much as 6% on Friday on a soft outlook despite first-quarter earnings narrowly beating analyst hopes, amid ongoing global supply issues.
Founded in 1968, Santa Clara, California-headquartered Intel (INTC) is the world’s biggest chipmaker. It designs and manufactures microprocessors for the global PC and data-centre markets. Late last year it released the Alder Lake chip for the PC market.
Intel (INTC) stock
The company has also expanded into areas such as the Internet of Things, artificial intelligence and the road vehicle industry, where it is testing technology for self-driving cars.
Intel competes against Advanced Micro Devices (AMD) and Nvidia (NVDA).
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For its fiscal first quarter ended April 2, Intel reported adjusted net income of 87 cents per share, down 35% from the prior year on revenue of $18.4bn (£14.7bn, €17.5bn). Net income was $8.1bn, up 141% on Q1 2021.
Analysts were expecting adjusted earnings of 78 cents on revenue of $18.3bn, according to figures widely available on financial news sites.
“Further, component supply constraints continue to be a challenge with the most recent Covid lockdowns in Shanghai further increasing supply-chain risk and contributing to inflationary pressures that are having a negative impact on PC [total addressable market share] for the year,” Intel CFO Dave Zinsner said in a statement.
Intel CEO Pat Gelsinger told analysts and investors at the company’s first-quarter earnings call that the current global chip shortage “will last into 2024 now”.
“In part that’s a supply statement, because we have seen that equipment shortages are really impinging the ability of the industry overall to ramp supply at the pace we earlier thought.”
Morningstar tech sector equity strategist Abhinav Davuluri wrote in a note: “Shares fell nearly 4% after hours, which we attribute to the soft revenue outlook for the second quarter, though we note management reiterated its 2022 sales outlook of $76bn, which implies a stronger second half.”
“The firm is dealing with an assortment of headwinds ranging from a resurgent Advanced Micro Devices that is pressuring Intel’s CPU market share, Apple’s shift to internal CPUs for its Mac PCs, and the transition from general-purpose computing to accelerated computing that relies on the likes of Nvidia’s GPUs.”
Another analyst isn't changing his "Underperform" rating on Intel stock.
"While we continue to believe INTC is doing the right things operationally (accelerating investment in manufacturing and R&D) with some indications this shift in focus is beginning to yield benefits, we are reluctant to shift to a more constructive stance on the stock until we believe the company has moved beyond near-term downside, a situation we don't believe is the case as of yet," Matt Bryson at Wedbush Securities said in a note obtained by Capital.com.
For its current second quarter, Intel is forecasting earnings of around 70 cents on revenue of approximately $18bn, with Wall Street analysts expecting earnings of 80 cents on revenue of $18.34bn.
Earnings for Intel’s current second quarter are due for release in July.
Companies are switching from on-premises IT equipment such as servers to cloud-based storage, and many cloud providers are using Intel and AMD chips in their data centres.
Intel reported that first-quarter sales at its data centre business rose 22% to $6bn, however that was below analyst estimates of $6.78bn. Revenue from client computing – which includes PC chips – fell 13% to $9.3bn, below analysts’ estimates of $9.42bn.
The company said it saw some customers cut PC chip orders to reduce unsold inventory, as consumers were buying fewer devices.
Intel saw explosive growth at its Intel Foundry Services (IFS) business, where first-quarter revenues grew 175% to $283m. IFS is a standalone chip foundry business that offers a wide range of manufacturing services.
In February, Intel said it was buying Tower Semiconductor for $5.4bn, which is expected to accelerate IFS’s goal of becoming a globally diverse end-to-end chip foundry, with one of the broadest portfolios of differentiated technology in the industry.