Proactive Investors - Intel (NASDAQ:INTC, ETR:INL) shares plunged more than 9% on Friday after the company’s second quarter outlook left “a lot to be desired” despite a modest earnings beat for the first quarter, Wedbush analysts believe.
For Q2, Intel expects earnings per share of $0.10 on revenue of $13 billion, below estimates of $0.25 on $13.6 billion respectively.
The analysts highlighted that this guidance marks only a modest lift in revenue and a dip in margins quarter-over-quarter due to startup costs and a dip in fab volume from the delay of some shipments.
“This expectation contrasts with Intel's prior outlook for sequential improvement through the course of 2024,” they wrote.
“A relatively steep pickup post calendar Q2 (albeit in line with last year's 2H recovery) will be necessary for Intel to meet expectations at the same time concerns around macro conditions and the likelihood of flatter 2H demand (particularly in areas like PCs) are proliferating.”
However, the Wedbush analysts believe a few of the insights revealed by Intel management during its earnings point to longer-term positives that the market is ignoring.
“Specifically, stronger shipments of Meteor Lake (even if off of a low base) and the release of Sierra Forrest confirm Intel's ability to produce silicon (including chiplet architectures on new lithographies),” they wrote.
“Moreover, 20A and Arrow Lake are around the corner and offer the opportunity for Intel to shift more of its silicon back to Intel manufacturing, a result that should improve fab loading and begin to moderate the economic drag Intel's IDM model is currently creating for its overall business.”
They concluded: “While we still aren't comfortable yet in getting more constructive around Intel, we also believe the recent pessimism weighing on the stock is arguably overdone, particularly given its recent struggles seem far more tied to cyclical trends (e.g., softer PC and enterprise datacenter demand) versus the problematic execution that led to its current less than enviable position.”
The analysts lowered their price target from $40 to $32.50 and awarded the stock a ‘Neutral’ rating.
Intel shares traded down 9.2% at $31.86 shortly before Friday’s closing bell.