Intel Stock Plummets as Analysts Highlight Its “Shocking” Decline

Intel Stock

Intel Stock (NASDAQ:INTC)

Investors worried about the security of Intel’s (NASDAQ:INTC) dividend saw the stock drop over 10% on Friday after the semiconductor giant posted poor earnings for the fourth quarter and provided a surprising projection for the first quarter.

The deterioration in the business’s financial performance was described as “shocking” by Bernstein analyst Stacy Rasgon, who has an underperforming rating on Intel stock. Rasgon grew worried about the company’s cash situation as a consequence of these developments.

Rasgon said to clients in a note that “it is now evident why Intel has to eliminate so much expense since the company’s previous expectations revealed to be fantasy.” Ragson said, “in our judgment, the scale of the deterioration in Intel’s cash position poses a potential risk to the company’s cash situation over time.”

Ragson continued by saying that investors should “at least start worrying about the security” of Intel’s dividend payments since the company is expected to begin running through cash.

Intel (NASDAQ:INTC) predicts a loss of 15 cents per share in the first quarter of 2023, excluding one-time items, on sales of $10.5 billion to $11.5 billion. The business forecasts gross margins of 39%, which is below the 40% target.

The consensus forecast for the company’s earnings is 25 cents per share, with revenues of $13.96 billion and gross margins of 45.5%.

According to John Vinh, an analyst at KeyBanc Capital Markets, PC and data center performance have gone from “poor to worse” as AMD continues to grab market share.

After “under-shipping” PC sales by 10% in 2022, Vinh said Intel (NASDAQ:INTC) anticipates an even larger disparity in the first quarter of this year, as well as “incremental degradation” in its data center business across regions, including the enterprise and China.

Intel expects a comeback in the second half of the year after a first-half correction, according to Vinh. Still, the company did not issue any full-year prediction. We anticipate that 2023 will be a difficult year with few positive changes.

Following Intel’s (NASDAQ:INTC) earnings report on Friday, shares of both AMD (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) declined by 1.8% and 1.2%, respectively, in early trade.

Ambrish Srivastava, an analyst at BMO Capital Markets, had a particularly dim view of Intel’s (NASDAQ:INTC) financial health and outlook.

A corporation of Intel’s scale “should know better than to spring a surprise such as dramatically decreasing depreciation,” Srivastava said in a message to customers, “whatever the justification, and however appealing it could seem.” Srivastava forecasts a negative free cash flow of $14B, which is down from his earlier projection of negative $3B, and lowers his profits per share prediction for the full year of 2023 to 35 cents from $1.80.

According to Ross Seymore, an analyst with a hold recommendation on Intel stock at Deutsche Bank, the firm’s bad results were “more than macro,” as the Pat Gelsinger-led corporation continues to inflict pain on itself.

This gap is mostly due to macro [economic] difficulties, as we both agree,” Seymore remarked. Intel’s excessively optimistic revenue projection and recruiting for 2022, as well as problems with the company’s data center strategy, are two examples of “Intel-specific dynamics compounding this suffering,” the authors write.

Seymore stated, “Overall, we empathize with Intel’s (NASDAQ:INTC) struggle of executing a multi-year and costly turnaround in the middle of a macro [and] semi[conductor]-cycle downturn.” He went on to say that Intel’s (NASDAQ:INTC) first-quarter projection “may very well reflect the long-awaited financial ‘bottom.’”

And yet, as Seymore put it, “the surprising depth of that ‘bottom’ is likely to reinforce investor skepticism over both the chance and timing of any revolutionary structural resurgence.”

When asked earlier this month whether Intel (NASDAQ:INTC) was still in discussions with Italy to establish a fab there, Gelsinger answered that the firm was, but that it was also talking to other European nations.

Featured Image: Pexels @ Sergei Starostin

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