Intel’s ‘unexplained’ earnings show it can’t predict its own results, analyst says

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After it released its fiscal second-quarter 2022 earnings report earlier this week, chip maker Intel became the subject of some solid analyst coverage from a handful of Wall Street firms. Intel’s recent earnings saw the company’s revenue and net income decline annually by 22% and 109%, respectively, as its management attributed the decline in revenue to the current economic slowdown and net loss to higher capital expenditures as it looks to regain its leadership in chip manufacturing technology. and establish itself on a solid footing in the contract chip manufacturing industry.

After the earnings, Wall Street analysts almost unanimously lowered their target price for Intel shares and posted notes with a variety of criticism. One of those came from Northland, who expressed surprise at Intel’s apparent unwillingness to disappointing earnings report.

Northland analyst says Intel should have announced second-quarter results

At least seven Wall Street analysts covering the semiconductor industry slashed Intel’s stock price the day after the release of its second-quarter 2022 earnings report. The lowest came from Rosenblatt, who cut his price target by $10 to $30, calling the earnings “an unmitigated disaster.” diluted” and also questioned why the results were not announced in advance. The analyst also warned that the Intel data center market will suffer for years to come.

The second lowest price target came from research firm Susquehanna, which lowered it to $33 from $40 and reported that while the earnings report was thought to be a one-time event, there are ongoing issues in Intel’s business model that merit caution for years to come. These include the growing popularity of Arm-based data center processors, AMD’s rapid rise in the personal computing space and massive capital expenditures that will continue to shrink net income amid downturn risks stemming from the shrinking personal computing market.

Details of Intel’s revenue and operating income for the second quarter of 2022 (Q2 2022). Image: Intel Corporation

Northland analyst Joss Richard has the highest price target for the company in our sample today, cutting it from the previous $62 to a more modest $55. However, in his comments, Richard took charge of the company because he stated that earnings report is unforgivable. The analyst added that the unforgivable earnings report called into question the company’s ability to handle investor relations and showed that Intel may lack the ability to predict its results early on because it failed to announce earnings in advance.

However, Richard maintained a moderate tone of optimism for the company, stating that he expects the second and third quarters to be the worst for Intel and that the results are not surprising given the historic turnaround the company is trying to make.

Jefferies joined the chorus, setting a base case for Intel losing market share to both NVIDIA and AMD in the PC, server, and data center markets. As for the gains, the research firm noted that the fabless model, processing technology implementation and potential AMD poor implementation could breathe new life into the company. In the long term, Jefferies explained that the incremental switch to Arm is a major threat to Intel, and that in her view, Intel’s best long-term strategy would be to switch to a fabless model through a joint venture with Taiwan Semiconductor Manufacturing Corporation (TSMC). In such a scenario, Intel would be best suited to split the capital expenditures with the US government and TSMC, as well as provide joint foundry services.

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