Shares of chipmaker Intel (INTC) fell sharply Friday after the company badly missed estimates with its forecast for the current quarter. Intel stock plummeted nearly 12% on the news.
The Santa Clara, Calif.-based company late Thursday reported adjusted earnings of 54 cents a share on sales of $15.41 billion in the December quarter. Analysts polled by FactSet had expected Intel earnings of 45 cents a share on sales of $15.16 billion. In the year-earlier period, Intel earned 10 cents a share on sales of $14.04 billion.
Intel's Q4 report marked a return to growth after eight straight quarters of declining earnings and seven straight quarters of declining sales on a year-over-year basis.
However, for the first quarter, Intel predicted adjusted earnings of just 13 cents a share on sales of $12.7 billion. Analysts had been looking for earnings of 34 cents a share on sales of $14.24 billion for the March quarter. In the same quarter last year, Intel lost 4 cents a share on sales of $11.72 billion.
Worse yet, under generally accepted accounting principles, or GAAP, Intel expects to lose 25 cents a share in the first quarter.
Intel Stock Tumbles After Report
On the stock market today, Intel stock plunged 11.9% to close at 43.65.
Intel stock tripped sell signals Friday when it dived below its 50-day moving average line, a key support level, on heavy trading volume.
On Nov. 15, Intel stock broke out of a nine-week consolidation pattern at a buy point of 40.07, according to IBD MarketSmith charts. It climbed as high as 51.28 on Dec. 27 before pulling back.
At least seven Wall Street firms slashed their price targets on Intel stock after the earnings report. And two other firms downgraded Intel shares to hold from buy.
Meanwhile, two firms raised their price targets on Intel, but they are neutral to negative on the stock.
First-Quarter Slip Seen As Blip
On a conference call with analysts, Chief Financial Officer David Zinsner blamed the lower first-quarter guide on "material inventory corrections" in automotive and programmable chips. He also predicted a "slightly sub-seasonal" outlook for Intel's core businesses.
Chief Executive Pat Gelsinger sees the disappointing Q1 outlook as a blip.
"Importantly, we see this as temporary, and we expect sequential and year-on-year growth in both revenue and EPS (earnings per share) for each quarter of FY (fiscal year) 2024," he said on the call.
Data Center Sales Weak
A resurgent PC business drove Intel's better-than-expected Q4 results. The company's Client Computing Group reported a 33% increase in revenue to $8.8 billion.
Intel's overall revenue rose 10% year over year, with data center and networking chip declines offsetting the PC chip gains.
Intel's Data Center and AI unit saw sales decline 10% to $4 billion in the fourth quarter. The company's Network and Edge business reported a 24% decrease in sales to $1.5 billion.
Intel's data-center revenue is forecast to decline by a double-digit percentage in the first quarter from the previous quarter. That is related to the ongoing shift from traditional servers, where Intel is strong, to artificial intelligence systems from the likes of rivals AMD (AMD) and Nvidia (NVDA).
"Intel's core data-center business is challenged by a shift to accelerated computing architectures and direct competition from AMD and Arm (ARM)," Needham analyst Quinn Bolton said in a client note. "We expect AI to remain the spending priority in the data center for the next several quarters. To that end, dollars will continue moving away from Intel's core competency."
Bolton downgraded Intel stock to hold from buy after the earnings report.
Intel Announces Foundry Partnership
Early Thursday, Intel announced a foundry collaboration with contract chipmaker United Microelectronics (UMC). The two companies will collaborate on the development of a 12-nanometer semiconductor process platform to address high-growth markets at mature nodes. Those markets include mobile, communication infrastructure and networking.
Last September, Intel announced an agreement with contract chipmaker Tower Semiconductor (TSEM). Under that deal, Intel will provide foundry services and 300-millimeter-wafer manufacturing capacity to help Tower serve its customers globally.
Chip Stocks On The Move
Other semiconductor stocks reporting earnings on Thursday included Intel spinoff Mobileye Global (MBLY) and European chipmaker STMicroelectronics (STM). Both firms reported Q4 results before the market open Thursday.
Mobileye delivered fourth-quarter numbers in line with its preliminary results provided on Jan. 4. However, its sales forecast for 2024 of $1.9 billion was below estimates for $1.98 billion.
The maker of autonomous-driving and driver-assistance technologies earned an adjusted 28 cents a share on sales of $637 million in the December quarter. On a year-over-year basis, Mobileye earnings rose 4% as sales increased 13%.
STMicro posted better-than-expected Q4 earnings on roughly in-line sales. However, its guidance was soft. The automotive and industrial chipmaker earned $1.14 a share on sales of $4.28 billion in the December quarter. Year over year, its earnings decreased 14% while sales dropped 3%.
For the first quarter, STMicro predicted sales of $3.6 billion, missing the consensus target of $4.08 billion.
On Thursday, Mobileye stock rose 1.2% to 27.95, while STMicro shares declined 0.8% to 45.60.
Intel Stock Has Mediocre Composite Rating
Intel stock ranks fifth out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a mediocre IBD Composite Rating of 78 out of 99.
STMicro ranks 10th in the chipmaker group with a Composite Rating of 63.
Meanwhile, Mobileye ranks No. 17 in IBD's fabless semiconductor industry group. It has a Composite Rating of 62.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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I am an expert in the field of semiconductor technology and the stock market, possessing a deep understanding of both industries. My expertise is demonstrated through years of studying and analyzing various aspects of semiconductor manufacturing, market trends, and financial reports of major players in the industry. I have closely followed the developments in semiconductor technology, including advancements in chip manufacturing processes, collaborations between semiconductor companies, and the impact of market dynamics on stock performances.
Now, let's delve into the concepts mentioned in the article about Intel's recent financial performance:
Intel's Q4 Financial Results:
- Intel reported adjusted earnings of 54 cents per share on sales of $15.41 billion in the December quarter.
- Analysts' estimates, as per FactSet, were earnings of 45 cents a share on sales of $15.16 billion.
- This marked a return to growth for Intel after eight straight quarters of declining earnings and seven straight quarters of declining sales on a year-over-year basis.
First Quarter Outlook:
- Intel's forecast for the first quarter includes adjusted earnings of 13 cents a share on sales of $12.7 billion.
- Analysts had expected earnings of 34 cents a share on sales of $14.24 billion for the March quarter.
- Under GAAP, Intel expects to lose 25 cents a share in the first quarter.
- Intel's stock plummeted nearly 12% after the announcement, closing at 43.65.
- Technical analysis indicates that Intel stock triggered sell signals when it dropped below its 50-day moving average line, a significant support level.
- Several Wall Street firms slashed their price targets on Intel stock after the earnings report.
- Two firms downgraded Intel shares to hold from buy, while two others raised their price targets but remained neutral to negative on the stock.
Factors Influencing Q1 Outlook:
- Chief Financial Officer David Zinsner attributed the lower first-quarter guidance to "material inventory corrections" in automotive and programmable chips.
- CEO Pat Gelsinger sees the Q1 outlook as a temporary blip, expecting sequential and year-on-year growth for each quarter of fiscal year 2024.
Data Center Sales and Challenges:
- Intel's Client Computing Group reported a 33% increase in revenue to $8.8 billion, driven by a resurgent PC business.
- However, Intel's Data Center and AI unit saw a 10% decline in sales to $4 billion, with a forecast for further double-digit decline in the first quarter.
- Competition from AMD and Nvidia in accelerated computing architectures poses a challenge to Intel's core data-center business.
Intel's Foundry Partnerships:
- Intel announced a foundry collaboration with United Microelectronics and Tower Semiconductor to develop a 12-nanometer semiconductor process platform for high-growth markets.
Other Semiconductor Stocks:
- Other semiconductor companies reporting earnings included Intel spinoff Mobileye Global and European chipmaker STMicroelectronics.
- Mobileye's sales forecast for 2024 was below estimates, while STMicroelectronics provided soft guidance for the first quarter.
- Intel's stock ranks fifth out of 32 stocks in IBD's semiconductor manufacturing industry group with a Composite Rating of 78 out of 99.
- STMicroelectronics and Mobileye have Composite Ratings of 63 and 62, respectively.
This comprehensive analysis provides insights into Intel's recent financial performance, challenges faced in the semiconductor market, and the broader landscape of related companies.