Intel Corp. came under fire from analysts after the company reported disappointing results on several fronts, pointing to a storm of macroeconomic, competitiveness and operational challenges.
The chip company slashed expectations for revenue, profit and gross margins in its report late Thursday, and executives released forecasts for the current quarter that came in short of expectations by a large margin.
CFO David Zinsner said on the call. “However, we believe our turnaround is clearly taking shape and we expect Q2 and Q3 to be the company’s financial bottom.”
Shares were down about 10% in pre-market trading on Friday.
The results had plenty of nutrients for the bears from Intel, while frightening even some optimistic analysts.
“While some investors may see a sinking kitchen in the results, it seems likely that things are about draining it,” Bernstein analyst Stacy Rasgon wrote, while repeating a poor rating for Intel stock. “Of course expectations for a quick fourth-quarter return could be dangerous if the overall situation continues to deteriorate, and while the company has lowered its PC market forecast this year (to -10%), the state of PC through 2023 and beyond remains murky. .
Calling the Intel report “the worst we’ve seen in our careers” and displaying it in the company’s data center unit, “it frankly seems likely that their competitor is about to destroy them over server sharing.”
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Rasgon lowered his price target to $30 from $35.
Barclays analyst Blayne Curtis also suggested more pain could follow.
“The big mistake smells like the vacancy moment some investors are looking for, but we’re not even sure if the estimates have reset enough as we struggle with exactly the revolutionary condition with ongoing roadmap issues and such a disconnect between the company’s optimism and current reality,” He wrote in his note to clients.
He kept a low rating on the stock with his target price cut to $35 from $40.
“We tend to warm up to the story after 4 years with UW [underweight] “But we don’t see the way forward with this roadmap, strategy, and market struggles,” Curtis wrote.
The chip bill, which was passed by Congress on Thursday, wrote, “removes another stimulus to the bull issue and the rubber will truly align with INTC’s flawed foundry strategy as the market moves from shortage to oversupply.”
CJ Muse of Evercore ISI described the latest report as “very ugly” as he noted a shortage of the company’s data center business that has been the company’s “bread and butter.”
“Not a good read given that the data center has been a general area of strength so far through earnings,” he wrote.
Additionally, Intel executives expect gross margins could return to the lower end of the target range by the end of the year, which makes Moses “wonder if this might be a bit aggressive.”
“Overall, this has been as messy as a quarter can get, and we’re not 100% convinced we’re out of the woods just yet – and it remains a very difficult road as INTC goes through its major transformation,” he wrote. Muse has a direct rating on Intel stock and a $40 target price.
Meanwhile, Baird analyst Tristan Gera lowered his valuation of the chip stock to neutral from outperforming, while lowering its target price to $40 from $60.
“We are increasingly concerned about more than 20 days of inventory days in the PC supply chain… which could take quarters to unfold, given what we believe are structural changes in PC consumer consumption patterns, along with a seasonally weak first half that It will continue to put pressure on Intel’s usage rates and gross margin recovery.”
Thor Intel, Srini Bagori of SMBC Nikko Securities America, admitted that the latest report made him “clearly disappointed”, but saw cyclical and macroeconomic issues as to blame for Intel’s problems.
“We believe a factory reset sets the stage for lower estimates in the near term,” he wrote. “The fourth-quarter forecast is achievable in our view because 1) it indicates a decline in PC CPU volume of approximately 10% against pre-pandemic levels and 2) it assumes a slower slope than Sapphire Rapids.”
Pajjuri has an outperformance rating on Intel stock, even though it cut its price target to $46 from $50.
Intel shares have lost 23% so far this year through Thursday, like the S&P 500 SPX,
It has decreased by 15%.