Intel's Stock Plummets Amid Weak Guidance and Margin Concerns

Intel: Jump The Ship While You Can (NASDAQ:INTC)

Without positive catalysts, investors can expect no returns. STRONG SELL. Sinking shipwreck. That's how you could describe Intel Corporation (NASDAQ:INTC) following the disastrous Q2 earnings report. The company has reported underwhelming performance, badly missing the analysts' expectations and issuing a weak Q3 guidance, despite hopes of turnaround starting to materialize in 2024. Following the report, Intel's stock price is set to wipe out over $30B market cap, setting it for the worst sell-off since 2000 following the suspension of its attractive dividend, and signaling intention to cut 15% of its workforce amidst the struggles. Being in the wrong product category, missing the AI GPU investment super-cycle, and further widening the gap between Taiwan Semiconductor Manufacturing Company (TSM), the 27% stock plunge is fully justified. Let me show you why I take a bearish stance on the company and why investors with long exposure to the legacy chip maker might want to consider selling their shares while there is still some value left. Q2 Earnings Intel has disappointed even the last loyal shareholders with its Q2 earnings release, reporting $0.02 EPS with sales topping $12.83B. According to FactSet data, analysts were looking for $0.10 EPS and sales of $12.92B with Intel falling short on both on top and bottom lines. Intel's earnings have fallen 85% YoY and the sales are down 1%, even as other chip makers are experiencing explosive growth driven by strong demand for AI chips with expanding profit margins. To put Intel's disappointment into perspective, the Data Center and AI (DCAI) business unit, which should in theory be the beneficiary of the AI spending has reported only $3B in sales with negative growth of -3% and an Operating Margin of less than 10%. For instance, Advanced Micro Devices (AMD) reported its earnings less than a week ago with Q2 data center revenue of $2.8B, skyrocketing 115% YoY, and increasing Operating Margin from 11% to 26% YoY. The main beneficiary of the CAPEX super-cycle, Nvidia's (NVDA) has not yet reported its most recent quarterly results, but we can expect a meaningful double-digit growth with strong profit margins thanks to its industry-leading pricing power. This highlights the widening gap between the quality chip makers with the right product mix at the right time compared to Intel's faltering business. To add to the negative sentiment, Intel's business is further expecting a weakness in Q3. For the period, the business is expecting to earn $12.5 - $13.5B in revenue, falling short of the analyst's expectations of $14.43B in Q3. The profitability of the business is expected to remain under pressure with a gross margin of 38% (well below peers) and EPS of -$0.03, despite the turnaround efforts. Analysts were expecting to see improvement in the profit margins with EPS of at least $0.30, still below the prior year of $0.41. In response to what Intel's management describes as challenging market conditions, the company has announced layoffs of 15% of its 100,000 workforce to boost profit margins and retain cash, eliminating non-critical roles. Yet this is contrarian to what other chip makers are doing during periods of cyclical growth, who are aggressively competing for highly skilled engineers. Intel's strategy could further jeopardize the company's reputation and growth potential in what I now call, a highly uncertain future for the company. Even though Intel's dividend has already been reduced by 65% in 2023, the company has now suspended it altogether, further reducing the case for owning the stock. The business has still been paying $1B in quarterly dividends and with $53B of debt on its balance sheet, suspending the dividend is a sound financial strategy as the business is not expecting cash flow growth over the mid-term. Yet for investors, the suspension of dividends is bad news as Intel will now be removed from dividend ETFs and dividend fund strategies, further pressuring the stock price due to simple supply/demand dynamics, without any positive catalysts on the horizon. From Technology Leader to Laggard In 2000, when Intel's market cap reached $500B, the company was praised as the world's leading chipmaker, powering most personal computers. Today, 24 years later, following the Q2 earnings stock plunge, Intel's market cap is below $100B, disappointing investors and anyone seeking returns. To put Intel's disappointment into perspective, NVDA which Intel dominated for most of its history, is now 27x larger, and AMD is more than double the size. The fair question to ask is, what happened? Intel's decline did not happen overnight and the business has been continuously falling behind driven by a gradual shift in the industry. For decades, Intel's x86 CPU dominated personal computers and laptops, however, recently ARM's (ARM) architecture has been favored by smartphone and tablet manufacturers, such as Apple's (AAPL) M1 Chip, thanks to its improved energy efficiency and lower heat footprint. As the ARM's architecture gains more ground, Intel's x86 architecture slowly becomes obsolete. Yet, that's only part of the story. Intel's business has been slow in rolling out new products and by this point, investors are well accustomed to challenges, particularly on the production side with the 10nm chip which has been delayed more than two years, compared to TSMC which was already shipping its equivalent 7nm chips in 2022 in bulk to major customers such as Apple and Huawei, putting pressure on Intel's market share and reputation. To fight back the market share loss, Intel was aiming to spend $100B across the US in the following years to build and expand its existing foundry footprint, however, the result of this bold plan, which is aimed to revive growth, is questioned as foundry's top-line has grew mere 4% in Q2. As an immediate red flag to the plan, Intel announced during the Q2 earnings call, that it would cut spending on plant and equipment in 2024 by more than 20%, expecting now gross CAPEX between $25B and $27B to avoid cash burn and boost profit margins. For 2025 the company sees capex hitting $20B to $23B. To put the numbers in perspective, TSMC is aiming to invest $30B in CAPEX this year to quickly build capacity amidst the strong AI chips demand, with more investments planned in the subsequent years. Reducing CAPEX spending, especially when already behind in manufacturing capabilities, seems like an ineffective strategy to catch up to the industry leader. To me, this plan sounds like a failing turnaround, with the company having to focus on shoring up its balance sheet, instead of focusing on business growth. To make things worse, Intel's server chip business is playing in the wrong field altogether not focusing on GPUs, which are powering data centers of the new generation with a focus on AI applications. While NVDA and AMD are seeing massive growth in the data center business, Intel is falling behind despite its 1.7x larger R&D budget compared to NVDA and 2.6x the size of AMD's. If Intel's foundry and server chip business is not capable of delivering meaningful growth and returns to its shareholders during a CAPEX super-cycle with businesses such as Meta (META) and Microsoft (MSFT) pouring billions into new data center infrastructure, expectations are Intel won't be able to deliver desired returns in the future either. What's Left For Investors? "Intel's issues are now approaching the existential in our view," Bernstein analyst Stacy Rasgon said. That's what is the sentiment among analysts, following the Q2 earnings report, as many were expecting the turnaround efficiencies to kick in, instead, they woke up to Intel's worst stock slump since the dot-com era, wiping out $30B of its market cap. Even though Intel will not go out of business in the near term thanks to its still strong Client Group business, the negative sentiment and price movement are well justified. With the business facing furious competition, lacking direction, and reporting negative top-line growth even amid the AI CAPEX super-cycle, investors should consider selling their long positions even if that means realizing a loss. With a 15% reduction in workforce, lack of new product releases, and lower CAPEX spending the business is no place to catch up to much higher quality companies such as NVDA and AMD, and no positive catalysts mean no returns for investors. With 30 years until retirement, as a Financial Analyst at a Fortune 500 firm, I'm strategically building a robust Growth Portfolio designed to fuel both capital appreciation and consistent dividend growth. My focus is on identifying companies with wide moats, sustainable competitive advantages, and reasonable valuations relative to their projected earnings growth across US and EU."Beyond mere yield chasing, dividend investing for me is about uncovering companies with robust free cash flow." Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Intel Stock: No Pain, No Gain, Uncertain Turnaround Ahead (NASDAQ:INTC)

Moving forward, the management needs to miraculously "pull a rabbit out of the hat" to not only survive the highly competitive industry, but to eventually thrive and regain the market's/ shareholders' trust. We previously covered Intel (NASDAQ:INTC) in April 2024, discussing its underwhelming Foundry prospects after the release of its new segment reporting, as the IDM 2.0 brought forth the uncertain cash burn and drag on its overall profitability. This was on top of its delayed node roadmap compared to its foundry peer, signaling Intel Foundry's uncertain prospects due to its nascency. While we were optimistic about the stock's US-made sentiments, it remained to be seen when its foundry segment would be able to deliver the critical combination of node advancement, volume manufacturing, and profitability, resulting in our reiterated Hold rating. Since then, INTC has already pulled back tremendously by -44.4%, well underperforming the wider market at +2.5%, triggered by the underwhelming FQ2'24 financial performance, dividend suspension, and drastic layoffs. Combined with the ongoing market rotation from high growth semiconductor stocks and the intensifying market pessimism surrounding generative AI, we believe that there may be more pain during its uncertain turnaround, resulting in our reiterated Hold rating. Unless one had been living under a rock, it went without saying that INTC, as a legacy semiconductor company, had failed to capitalize on its previous x86 market leadership and the ongoing AI boom. For example, INTC has reported moderating x86 CPU market share of 63.5% by Q3'24 (-0.4 points QoQ/ +0.9 YoY/ -13.4 from FQ2'19 levels of 76.9%), as its direct competitor, Advanced Micro Devices (AMD) continues to grow to 33.6% (+0.2 points QoQ/ -1.5 YoY/ +10.5 from F2'19 levels of 23.1%). At the same time, in an attempt to grow x86 market shares and Client Computing Group revenues to $7.41B in FQ2'24 (-1.5% QoQ/ +9.2% YoY), the management has went on drastic price cuts, naturally impacting the segment's operating margins to 33.6% (-1.4 points QoQ/ +4.4 YoY/ -7.3 from FY2019 levels of 40.9%). Furthermore, it goes without saying that during the ongoing generative AI boom, Nvidia (NVDA) has already emerged as the clear leader. This is thanks to Jensen Huang's visionary gift of a DGX-1 supercomputer to OpenAI back in 2016 and the subsequent nurturing of a "large community of AI programmers who consistently invent using the company's technology." This development has triggered NVDA's robust data center revenue growth to $22.6B (+23% QoQ/ +427% YoY) in the latest quarter and the leading share of up to 90% in the AI GPU chip market/ 80% of the entire data center AI chip market. How about INTC? Well, the Pat Gelsinger led company reported only $3.04B of Data Center/ AI related revenues in FQ2'24 (inline QoQ/ -3.4% YoY), while only guiding FQ3'24 revenues of $3B (inline QoQ/ -3% YoY), exemplifying its inability to capitalize on the ongoing AI boom. This is despite the Intel Gaudi 3 AI accelerator on track to launch in FQ3'24, with "roughly two-times the performance per dollar on both inference and training versus the leading competitor," implying that NVDA's GPU/ AI accelerator offerings remain inherently more attractive to hyperscalers despite the hefty price tag. While NVDA's Blackwell launch may be moderately delayed, it is apparent that multiple hyperscalers have placed further trust in its superior AI accelerator offerings, based on GOOG's (GOOG) order worth $10B, Meta (META) at $10B, and Microsoft (MSFT) at $1.62B. These developments are also why INTC has reported underwhelming FQ2'24 revenues of $12.8B (+0.7% QoQ/ -0.7% YoY) and adj EPS of $0.02 (-88.8% QoQ/ -84.6% YoY). Combined with the hefty FY2024 capital expenditure guidance of $26B (+1% YoY/ +60.3% from FY2019 levels) and FY2025 at $21.5B (-17.3% YoY), attributed to its Foundry dreams, it is unsurprising that the company has reported negative Free Cash Flow of -$12.58B over the last twelve months (+24.8% sequentially/ -174.3% from FY2019 levels of $16.93B). This is why we believe that the management's decision to suspend dividends from Q4'24 onwards has been prudent, building upon the previous cut announced in early 2023 - one that we believe should have happened earlier, with the management "seemingly financing its dividend payouts with debt." This is especially since INTC's balance sheet has been consistently deteriorating, with growing (current and long-term) debts of $53.02B (+1.1% QoQ/ +7.6% YoY/ +82.8% from FY2019 levels of $28.99B). Moving forward, with most of the bad news already baked in and the peak capex intensity behind us, we believe that the management may be better positioned to slowly turn the legacy ship around. This is partly aided by the projected reduction of -$1.6B in Operating Expenses in 2024 and -$4.1B by 2025, down from the $21.6B reported in FY2023, and the capex reduction - resulting in the supposed $10B in cost savings. Even so, if we may be painfully honest, it is uncertain how successful their eventual turnaround may be, since INTC's legacy businesses have failed to innovate and stay ahead of the rapidly changing semiconductor landscape. With other players already gaining massive headways in the x86, data center, and CPU/ GPU end markets, amongst others, the management needs to miraculously "pull a rabbit out of the hat" to not only survive the highly competitive industry, but to eventually thrive and regain the market's/ shareholders' trust. For now, a quiet optimism is already observed in the promising consensus forward estimates, with INTC expected to report trough FY2024/ FY2025 years and FY2026 likely to bring forth drastically improved numbers. Even so, with bloated balance sheet and negative Free Cash Flows, we believe the management is unlikely to reinstate dividends in the intermediate term, effectively putting an end to the 31 years of consecutive dividend payouts. As a result of these pessimistic developments, it is unsurprising that the market has opted to punish INTC first, as observed in the drastic two day pullback by -30.1%, or the equivalent -$39B in market capitalization. For context, we had offered a fair value estimate of $30.10 in our last article, based on the annualized FQ4'23 adj EPS of $1.36 (after adjusting for the $1.2B litigation benefit for improved accuracy, as opposed to the reported sum of $2.52) and the 5Y P/E mean valuations of 22.15x. While INTC is finally cheaper, we are uncertain if it is wise to recommend a Buy rating here, since there may be six more quarters of uncertainty until its headcount reductions are completed. At the same time, while the management has highlighted a robust overall AI PC market share growth from less than 10% in 2024 to over 50% by 2026, it remains to be seen how much gains the legacy semiconductor company may report, with the CPU market increasingly competitive as QUALCOMM (QCOM) enters the picture with ARM-based processor. Combined with the uncertain monetization of its foundry ambitions, as discussed in our previous article here, and other more experienced foundry leaders establishing geopolitically secure operations in Japan/ the US, we believe that it may be more prudent to maintain our previous Hold rating here. Lastly, with Pat Gelsinger failing to deliver (in hindsight) the overly ambitious turnaround story, we believe that there may be more uncertainty ahead, especially since INTC no longer pays out dividends while boasting minimal near-term growth prospects.

Intel Stock: Burst Even Without A Bubble (NASDAQ:INTC)

Looking for a helping hand in the market? Members of Ultimate Growth Investing get exclusive ideas and guidance to navigate any climate. Learn More " Intel: The King That It Was Once Intel Corporation (NASDAQ:INTC) investors have endured a torrid 2024 after the stock topped out in December 2023. As a result, the optimism that saw INTC outperform its semiconductor peers (SMH) (SOXX) between May and December 2023 has been completely dissolved. Based on the stock's almost 30% one-day slide yesterday (August 2), INTC revisited lows last observed in early 2013 as investors fled for the exit doors. In my previous article in June, I downgraded the stock, emphasizing that "Intel is no longer the King that it once was." I highlighted significant challenges across its ecosystem, worsened by Nvidia's (NVDA) forays to possibly unhinge Intel's data center leadership. The downgrade proved timely, as the stock has significantly underperformed the S&P 500 (SPX) (SPY) since then. Intel Slumped As Nvidia Surged Intel investors still holding the bag must look in the mirror and ask whether they believe CEO Pat Gelsinger and his team can save the ship from sinking further. As seen above, Gelsinger likely didn't anticipate Nvidia's incredible data center AI revenue surge over the past year. This week, Intel's Q2 earnings release demonstrated how bad it has been for the dethroned King of semiconductors. Not only did INTC resort to cutting 15% of its workforce to save costs, but the company's guidance also missed by a mile. AMD's (AMD) recent data center AI revenue upgrade underscores the missed opportunities in Intel's roadmap. Therefore, Intel's execution problems have hampered its ability to guide more confidently. Intel Remains On Track For Five Nodes In Four Years Pat Gelsiner highlighted significant progress in node advancement. However, bearish investors could consider it a "red herring" against Intel's dismal execution. Accordingly, management emphasized that it remains on track to regain process leadership through Intel 18A. Notably, the company highlighted that "the ramp of Intel 4, Intel 3, and Intel 20A8 is ready for production next quarter." In addition, the company has also "released the 1.0 PDK" for Intel 18A, with the aim of moving toward "production wafer start volumes in the first half of 2025." Consequently, it should have lifted the company's growth prospects as it looks to regain process leadership from TSMC (TSM). Intel's Optimism Not Reflected In Its Guidance Therefore, I expected Intel to provide more assurances with its execution, although Intel's guidance highlights the bifurcation between optimism and reality. Gelsinger's decision to cut Intel's employee count by 15% was said to be the "hardest" decision in his career. However, Intel's poor execution led to a moment of reckoning as "Intel's employee count had grown in recent years even as revenue fell." The fact that its semiconductor peers have outperformed the S&P 500 over the past year while INTC fell to a 10-year low accentuates the market's dissatisfaction with the company's performance. Can the company mount a reasonable comeback, even as it attempts to challenge Nvidia in data center AI leadership? Management indicated that its Gaudi 3 AI accelerators (Q3 launch) are expected "to deliver roughly 2 times performance per dollar in both inference and training versus H100." As a result, Intel wants investors and customers to know that it's competitive, bolstering its claims to be more cost-effective than Nvidia's offerings. That should have improved the market's confidence in Intel as the hyperscalers have decided to invest more aggressively in technical AI infrastructure. Their fear of falling behind the investment curve has overridden the potential risks of overbuilding capacity. Gelsinger's projection of strength in its product offerings should have bolstered INTC. Nvidia's Incursions Is Likely Far From Done Is the market wrong? No, I don't think so. Nvidia's ability to innovate rapidly ahead of the market has likely entrenched its leadership capabilities. Its ability to execute well and deliver the most advanced AI chips to its customers underscores the high confidence level in NVDA's technological stack. Therefore, I wasn't surprised when the media reported that Nvidia's rivals were upset about its product bundling strategies and complained about potential antitrust violations. Such reports corroborate Nvidia's market dominance over its peers. They also highlight the challenges Intel and other challengers face, particularly as they attempt to defend against NVDA's incursions to untether their traditional data center leadership. Interestingly, Nvidia has reportedly faced "significant" challenges on its most advanced versions of its new Blackwell AI chips. As a result, the company is expected to face shipments delay, potentially affecting its execution in Q3 and Q4. Therefore, the Intel optimist could point out the concentration risks of over-relying on just one major AI chips supplier, arguing in favor of diversification. However, a closer inspection of the massive Blackwell orders placed with Nvidia suggests its market leadership seems incredibly hard to dislodge. The Information reported: Giant Blackwell Orders. Google, for example, has ordered more than 400,000 GB200 chips, said the two people who work on the chip. Together with server hardware, the cost of Google's orders could be well north of $10 billion, though it isn't clear when Google expects to receive them. Meta also placed an order worth at least $10 billion, while Microsoft in recent weeks increased the size of its order 20%, the two people said, though its total order size couldn't be learned. According to its most recent report, Nvidia's data center was close to an annualized $100B revenue run rate. Therefore, given its tepid guidance, Intel doesn't seem likely to have attracted substantial customer interest to bolster its AI chips projections. TSMC has also consolidated its leadership as the most preferred foundry for AMD (AMD), Nvidia, and Broadcom (AVGO). As a result, it could further strengthen its gap against Intel. While Intel is expected to benefit from the transition to AI PCs as they ship (anticipated 40M units shipped by 2025), it might not be enough to mitigate the impact against its data center market share decline. Is INTC Stock A Buy, Sell, Or Hold? Given its recent tepid guidance, Wall Street estimates on Intel have been downgraded. Despite that, analysts expect its operating performance to bottom in 2024. As highlighted earlier, Intel's improved product cadence suggests that the estimates aren't unreasonable. However, the past missteps demonstrate the need to reflect higher execution risks against Intel's transformation. Furthermore, the decision to suspend its dividends from Q4 likely stunned income investors awaiting its turnaround. As a result, income investors have likely bailed in droves, reflected in its decline this week. As seen above, INTC's "C" valuation grade suggests even after the battering, the stock is not undervalued, as estimates were downgraded. However, a better-than-expected growth inflection from 2025 might help provide a more robust valuation re-rating if Intel improves on its execution. INTC's outperformance between May and December 2023 suggests we shouldn't write off the stock completely, given its underlying profitability ("A+" profitability grade). Consequently, I assess investors who wanted to flee have likely made their call this week, suggesting possible peak pessimism could have been reached. Despite that, I still assess significant fundamental challenges in its turnaround. Nvidia's potentially missed Blackwell execution in Q3 might urge the customers to consider diversification. Coupled with possibly more robust AI PC shipments, INTC's long-term bottoming thesis isn't unreasonable. Notwithstanding my optimism, I assess INTC's risk/reward profile as balanced, as the fundamental challenges seem to outweigh the potential growth inflection from 2025. High-conviction investors might consider the selloff as overstated. However, attempting to catch its falling knives now could still be too early, as significant uncertainties cloud its execution capabilities over the next two years. Rating: Maintain Hold. Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking. Note that the rating is not intended to time a specific entry/exit at the point of writing unless otherwise specified. I Want To Hear From You Have constructive commentary to improve our thesis? Spotted a critical gap in our view? Saw something important that we didn't? Agree or disagree? Comment below with the aim of helping everyone in the community to learn better! A Unique Price Action-based Growth Investing Service We believe price action is a leading indicator. We called the TSLA top in late 2021.We then picked TSLA's bottom in December 2022.We updated members that the NASDAQ had long-term bearish price action signals in November 2021.We told members that the S&P 500 likely bottomed in October 2022.Members navigated the turning points of the market confidently in our service.Members tuned out the noise in the financial media and focused on what really matters: Price Action. Sign up now for a Risk-Free 14-Day free trial! JR Research is an opportunistic investor. He was recognized by TipRanks as a Top Analyst. He was also recognized by Seeking Alpha as a "Top Analyst To Follow" for Technology, Software, and Internet, as well as for Growth and GARP. He identifies attractive risk/reward opportunities supported by robust price action to potentially generate alpha well above the S&P 500. He has also demonstrated outperformance with his picks. He focuses on identifying growth investing opportunities that present the most attractive risk/reward upside potential. His approach combines sharp price action analysis with fundamentals investing. He tends to avoid overhyped and overvalued stocks while capitalizing on battered stocks with significant upside recovery possibilities. He runs the investing group Ultimate Growth Investing which specializes in identifying high-potential opportunities across various sectors. He focuses on ideas that has strong growth potential and well-beaten contrarian plays, with an 18 to 24 month outlook for the thesis to play out. The group is designed for investors seeking to capitalize on growth stocks with robust fundamentals, buying momentum, and turnaround plays at highly attractive valuations. Learn more Analyst's Disclosure: I/we have a beneficial long position in the shares of SMH, AMD, NVDA, AVGO, TSM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. 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Raymond James downgrades Intel stock, flags ongoing margin challenges By Investing.com

On Friday, Raymond James adjusted its stance on Intel Corporation (NASDAQ:INTC), moving the chipmaker's stock from an Outperform rating to Market Perform. The firm expressed concern over Intel's third-quarter outlook, which was weaker than anticipated, especially regarding gross margins. The downgrade follows Intel's report of a 480 basis point gross margin miss, attributed to several factors, including the accelerated shift of wafer production to a higher-cost facility in Ireland -- a move likely tied to the conditions of the Apollo investment. The analyst at Raymond James noted that the growth in AI PCs is proving to be a more significant challenge to margins than expected. The costs associated with outsourcing wafers are eroding the benefits of modest average selling price (ASP) premiums. Despite these challenges, there were positive aspects mentioned, such as Intel's process roadmap being on schedule, with the completion of 1.0PDK for 18A, and the company's solid balance sheet. Intel's aggressive cost-cutting measures are also expected to help limit cash burn. However, the analyst cautioned that gross margin headwinds are likely to continue through 2025, with limited opportunities for revenue growth in the near term. This outlook suggests that profitability could remain under strain for an extended period. The report concluded with a recognition of Intel's current low valuation, trading at less than one times price-to-book (P/B), and the potential for significant value to be unlocked through a possible Foundry business separation. Despite these factors, Raymond James has decided to adopt a neutral position on Intel shares for the time being. In other recent news, Intel Corporation has reported a series of significant developments. The company has announced plans to reduce its workforce by 15% and suspend its quarterly dividend starting in the fourth quarter. This decision is part of a strategic shift focusing on its underperforming manufacturing operations. Intel's third-quarter revenue is projected to fall between $12.5 billion and $13.5 billion, reflecting the challenges it faces in a competitive and evolving semiconductor industry. In response to these challenges, Raymond James has downgraded Intel's stock from an Outperform rating to Market Perform due to concerns over the company's third-quarter outlook. The firm highlighted the company's gross margin miss and the potential for continued margin headwinds through 2025. Despite these concerns, Intel's process roadmap is reportedly on schedule, with the completion of 1.0PDK for 18A and aggressive cost-cutting measures expected to limit cash burn. In addition to these financial adjustments, Intel has announced the development of an optical compute interconnect (OCI) chiplet, aimed at enhancing data processing speeds within AI infrastructure. This aligns with the company's ambition to reach $1 billion in cumulative software revenue by 2027. Furthermore, Intel's subsidiary, Mobileye, is expanding its technology partnership with Zeekr, a premium electric mobility brand, to accelerate the localization of Mobileye's technologies in China and integrate them into future Zeekr models for the global market. These are the recent developments concerning Intel Corporation. Intel Corporation's (NASDAQ:INTC) current market dynamics and financial metrics provide additional context to Raymond James' recent rating adjustment. According to real-time data from InvestingPro, Intel's market capitalization stands at $123.66 billion, reflecting its significant presence in the semiconductor industry. The company's Price/Earnings (P/E) ratio, as of the last twelve months leading up to Q1 2024, is 29.48, which is considered low relative to its near-term earnings growth. This aligns with an InvestingPro Tip that highlights Intel's trading at a low P/E ratio, hinting at potential undervaluation. Another InvestingPro Tip emphasizes Intel's status as a prominent player in the Semiconductors & Semiconductor Equipment industry, which is reinforced by the company's ability to maintain dividend payments for 33 consecutive years, showcasing its financial resilience and commitment to shareholder returns. The dividend yield as of May 2024 stands at 1.72%, with the company's stock trading near its 52-week low, which could be an indicator for value investors. Despite a modest revenue decline of 2.09% over the last twelve months as of Q1 2024, Intel has shown a quarterly revenue growth of 8.61%, suggesting a potential turnaround in sales. Additionally, the company's gross profit margin remains robust at 41.49%, although the gross margin miss in the third quarter has raised concerns. For investors seeking deeper insights, InvestingPro offers additional tips on Intel Corporation, providing a comprehensive view of the company's financial health and market position. These tips can be explored further to make informed investment decisions.

Intel's stock falls 25% after weak guidance, margins draw strong reactions on Wall Street

Intel's (NASDAQ:INTC) stock plummeted about 25% premarket on Friday after second quarter results and outlook came below estimates, drawing sharp reactions from analysts. The company also announced that it would lay off about 15% of its employees, and suspend its dividend. Raymond James downgraded Intel to Market Perform from Outperform. The analysts expected the third quarter outlook to be weak but were surprised by the magnitude, especially on margins. Management attributed the gross margin miss (480 bps) to several factors, including the faster than expected transition of wafers to the higher-cost Ireland fab (likely a condition for Apollo investment). In addition, the analysts noted that that AI PC growth is turning out to be a bigger headwind to margins as the higher cost of external wafers is more than offsetting modest ASP premiums. However, on the positive side, the process roadmap appears on track (1.0PDK for 18A done), the balance sheet is in good shape, and aggressive cost cuts should limit cash burn, according to the analysts. Raymond James noted that while management sounded confident about longer-term targets, gross margin headwinds are expected to remain through 2025, and it sees limited incremental revenue drivers near-term. As such, the analysts expect profitability to remain under pressure and were thus moving to the sidelines despite the attractive valuation. Barclays Capital kept its Equal-weight rating on the stock but lowered the price target on the shares to $25 from $40. Analysts led by Tom O'Malley said that with growth and profitability fading amid a messy operational reorganization, they think the outcome of the turnaround hangs on the viability of 18A -- Intel's new process technology. The analysts noted that weaker numbers, a large layoff, and a long term capex cut frame the issues around Intel's June report. Arguably the most concerning change is the cancellation of the company's dividend starting in the fourth quarter. Gross margins came in nearly 500 bps weaker due to transferring Meteor Lake production from the R&D fab in Oregon to Ireland and will remain at depressed levels till next year, according to the analysts. The analysts added that Intel justifies this action with savings of $1B in capex spend they would have had to commit to Oregon, but they think this is likely more about accelerating external core products that are more competitive. The company also talked about $1B coming out of variable cost of goods sold, or COGS, next year but indicated that savings keep margins flat implying other pressures moving margins down, the analysts added. In addition, O'Malley and his team said that these are real structural issues that can be fixed by a strong ramp of the internal advanced processes, but the continued outsourcing, manufacturing fits and starts, and recent turnover in the manufacturing unit does seem like things are going worse not better. The analysts were hopeful that post Advanced Micro Devices (AMD) that Intel would share in some of the PC upside in the second half but have come away with things looking unclear than ever before. J.P. Morgan kept its Underweight rating on Intel and cut the price target to $26 from $35. A team led by analyst Harlan Sur noted that its Underweight thesis was underpinned by a historical multi-year period of product/technology/operational mis-execution from 2015-2021, and although the company's product/technology execution has been solid over the past two years, the significant gross margin miss unfortunately highlighted the need for strong operational execution to capitalize on its product/technology momentum to drive strong future earnings power potential. Operational execution will be even more important as Intel targets to become a global leader in the semiconductor foundry market. Intel and its operations team should have planned operationally to move its Intel 4/Intel 3 processes to its Ireland fab months ago compared to a hasty intra-quarter decision in the June quarter - which was the main driver of the negative gross margin surprise in the quarter and for the remainder of this year, the analysts added. Intel reported slightly lower June-quarter sales (China export control impact) but with a big margin/earnings miss, on the mentioned operational missteps, as per the analysts. For the third quarter, the company guided revenues up 1% quarter-over-quarter, well-below consensus and J.P. Morgan/market expectations on muted PC and Data center demand recovery in a seasonally stronger period on continued market share loss, customer AI spending prioritization, and customer inventory digestion, accordig to the analysts. Bofa maintained its Underperform rating on Intel's stock and materially reduce its Intel's forecasts after a weak second quarter and third quarter outlook with profitability challenges expected to persist into CY26E. Meanwhile, New Street Research downgraded Intel to Neutral with a $27 price target.

HSBC downgrades Intel stock, cites gross margin concerns By Investing.com

On Friday, HSBC (LON:HSBA) cut its rating on Intel Corporation (NASDAQ:INTC) stock from Hold to Reduce, significantly lowering the price target to $19.80 from the previous $35.00. This adjustment follows Intel's second-quarter 2024 earnings report, which revealed revenues and gross margins that fell short of expectations. Intel announced a second-quarter revenue of $12.8 billion, which was slightly below HSBC's estimate of $13 billion and just shy of the consensus estimate of $12.9 billion. A notable point of concern for HSBC was Intel's gross margin (GM) of 38.7%, which was significantly lower than both HSBC's and the consensus estimates of 43.5%. The company's management attributed the gross margin shortfall to several factors, primarily the increased wafer costs associated with transitioning 3nm/4nm production to its Ireland fabrication plant. This shift has not only impacted the second quarter but is also expected to affect the third quarter of 2024. Intel's guidance for the third-quarter gross margin stands at 38%, a figure that falls well below HSBC's estimated 44.3% and the broader consensus of 45.5%. Additionally, Intel's guidance for third-quarter 2024 revenue is set at $13 billion, which is notably less than HSBC's forecast of $14.5 billion and the consensus estimate of $14.3 billion. This guidance indicates that Intel may continue to face financial headwinds in the coming quarter. The revision in Intel's stock rating and price target by HSBC reflects the analyst's response to the company's latest financial performance and near-term expectations. This move by HSBC indicates a more cautious view of Intel's stock for potential investors. In other recent news, Intel Corporation has made several significant announcements following its second-quarter earnings report. The tech giant reported second-quarter revenues of $12.8 billion, falling slightly short of estimates. This led HSBC to downgrade the company's stock from Hold to Reduce and lower the price target to $19.80. Similarly, Raymond James adjusted its rating on Intel from Outperform to Market Perform, expressing concerns over the company's third-quarter outlook and ongoing margin challenges. Intel has also announced a workforce reduction of 15% and plans to suspend its quarterly dividend starting in the fourth quarter. These strategic shifts are focused on improving the company's underperforming manufacturing operations. Intel's third-quarter revenue is projected to fall between $12.5 billion and $13.5 billion, reflecting the competitive challenges it faces in the semiconductor industry. In the midst of these financial adjustments, Intel has revealed the development of an optical compute interconnect (OCI) chiplet aimed at enhancing data processing speeds within AI infrastructure. This aligns with the company's ambition to reach $1 billion in cumulative software revenue by 2027. Moreover, Intel's subsidiary, Mobileye, is expanding its partnership with Zeekr to accelerate the localization of Mobileye's technologies in China and integrate them into future Zeekr models for the global market. These are recent developments concerning Intel Corporation. Intel Corporation's (NASDAQ:INTC) recent financial performance, as highlighted in the article, aligns with several data points and trends observed in real-time metrics from InvestingPro. The company's market capitalization stands at $123.66 billion, and despite the revenue shortfall reported in the second quarter of 2024, Intel's revenue over the last twelve months was $55.24 billion. However, it's worth noting a slight revenue decline of 2.09% during this period. InvestingPro Tips suggest that Intel is trading at a low P/E ratio relative to near-term earnings growth, with a current P/E Ratio of 30.21 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 at 29.48. This could indicate that the stock is undervalued in terms of its earnings potential. Furthermore, Intel is recognized as a prominent player in the Semiconductors & Semiconductor Equipment industry and has a history of consistent dividend payments for 33 consecutive years, demonstrating a commitment to returning value to shareholders. Despite recent challenges, Intel's stock is trading near its 52-week low, which may present a potential opportunity for investors who believe in the company's long-term fundamentals. Moreover, the InvestingPro platform lists additional tips for Intel, providing more in-depth analysis for users interested in the semiconductor giant's outlook. For those considering an investment in Intel, it's essential to keep an eye on the company's performance metrics and industry position. The InvestingPro platform offers a comprehensive set of additional tips, with 7 more available for Intel, to help investors make more informed decisions.

Intel stock rating downgraded amid server market share loss By Investing.com

On Friday, New Street Research adjusted its stance on shares of Intel Corporation (NASDAQ:INTC), moving the chipmaker's rating from Buy to Neutral. The firm set a price target for Intel at $27.00, reflecting concerns over the company's performance and market competition. The downgrade comes as Intel faces continued loss of market share in both the PC and server segments. New Street Research highlighted that, despite new product shipments such as Meteor Lake, Sierra Forest, and Granite Rapids, Intel's competitors, particularly AMD, are making significant gains. AMD's market share in PCs is projected to rise above 20% and is expected to exceed 40% in servers by the fourth quarter. The analyst from New Street Research pointed out that the trend of improvement Intel showed in the PC market is no longer apparent, and with the relative scale of servers, Intel's position may weaken further. The firm's price target is based on a 13 times multiple of the projected $2.1 earnings per share in 2026. The report also noted that inventory movements could be a factor in the market share changes but emphasized that the lack of evidence of a turnaround in Intel's manufacturing and server capabilities is a major concern. The firm concluded that the risk-reward balance for owning Intel stock has tilted towards the unattractive side, prompting the downgrade. In other recent news, Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) experienced a drop in their market capitalization due to disappointing quarterly earnings. Microsoft's market cap decreased by approximately 6% to $3.1 trillion, and Tesla's profit margins shrunk to their lowest point in over five years. Despite these weaker results, Tesla's market cap increased by 17.2% to $740.1 billion, driven by positive outlooks on its future growth from Morgan Stanley (NYSE:MS). On the other hand, Advanced Micro Devices (NASDAQ:AMD) reported robust Q2 results with a 9% year-over-year increase in revenue, reaching $5.8 billion. The company's data center segment was the standout performer, with revenue surging by 115% to a record $2.8 billion. Additionally, AMD received a reiterated Buy rating from Benchmark following its bullish Q2 earnings report and future guidance. These are some of the recent developments in the technology sector. It's worth noting that despite the current market fluctuations, companies like AMD are continuing to invest in AI technology, indicating a positive outlook for the future of this sector. In light of New Street Research's downgrade of Intel and the competition it faces from AMD, it's pertinent to consider real-time data and insights from InvestingPro for a comprehensive market perspective. AMD's financial health and market performance provide context to the competitive landscape described in the article. InvestingPro Data indicates that AMD has a substantial market capitalization of $214.51 billion and is trading at a high earnings multiple, with a P/E ratio of 165.86. Despite recent downward revisions by analysts, AMD's revenue growth over the last twelve months stands at 6.4%, and the company has maintained a gross profit margin of 51.42%. These figures underscore AMD's financial resilience and its ability to generate profit from its revenues. InvestingPro Tips highlight that AMD is expected to see net income growth this year, reinforcing its position as a prominent player in the semiconductors industry. Additionally, while the stock has experienced a decline over the last month, AMD's liquid assets exceed its short-term obligations, suggesting a stable financial footing for immediate operational needs. For readers looking to delve deeper into AMD's financials and market performance, InvestingPro offers additional tips. Currently, there are 24 more tips available on InvestingPro, which can be accessed for further detailed analysis, including insights on AMD's profitability, debt levels, and valuation multiples. To explore these insights, visit https://www.investing.com/pro/AMD.

Intel price target cut by Roth/MKM, reatins Neutral rating By Investing.com

On Friday, Roth/MKM adjusted its outlook on Intel Corporation (NASDAQ: NASDAQ:INTC), reducing the price target to $25 from the previous $35 while retaining a Neutral rating on the stock. The adjustment follows Intel's guidance for the third quarter of 2024, which projected revenue and gross margin figures significantly below market expectations in view of unanticipated client product costs. According to the firm, Intel experienced healthy demand for client processor components designed for new AI notebooks. However, the company's gross margin suffered due to the necessity to distribute parts that were costlier than anticipated in order to meet this increased demand. This scenario has led to the contraction of Intel's gross margin. The analysis by Roth/MKM also suggested that for Intel to improve its competitive stance in this area, the launch of next-generation products would be essential. The firm's decision to lower the price target is a reflection of these factors impacting Intel's financial performance. The firm's commentary highlighted the need for Intel to address the gross margin contraction resulting from shipping higher-cost parts to satisfy the unexpected surge in demand. The statement from Roth/MKM emphasized, "While demand for client processor parts in support of newer AI NBs was healthy, we believe INTC's gross margin contraction reflected the need to ship higher than expected cost parts to fill this demand upside." Meanwhile, HSBC (LON:HSBA) downgraded Intel's stock to Reduce and lowered their price target to $19.80 due to concerns about the company's gross margin. Raymond James also shifted their rating from Outperform to Market Perform, flagging ongoing margin challenges. As Intel Corporation (NASDAQ:INTC) navigates market challenges, including a recent gross margin contraction, investors may find value in real-time data and insights. According to InvestingPro, Intel is currently trading at a low price-to-earnings (P/E) ratio of 30.21 relative to its near-term earnings growth, which could signal a potential undervaluation compared to its future earnings potential. Moreover, the company stands out as a prominent player in the Semiconductors & Semiconductor Equipment industry and has shown a commitment to returning value to shareholders by maintaining dividend payments for 33 consecutive years. InvestingPro data further reveals that Intel has experienced a 6-month price total return of -31.33%, reflecting the stock's significant decline over the period. Despite this, analysts predict the company will be profitable this year, with a basic EPS (Continuing Operations) for the last twelve months as of Q1 2024 at $0.97. Additionally, the company is trading near its 52-week low, which might be of interest to investors looking for entry points in the context of long-term value investing. For investors seeking more comprehensive analysis and additional insights, InvestingPro offers a range of tips, including 7 additional tips not mentioned here, to help navigate the investment landscape surrounding Intel. These can be accessed by visiting https://www.investing.com/pro/INTC.