Thursday saw a decline in the price of Intel (NASDAQ:INTC) shares as some Wall Street analysts questioned the semiconductor company’s optimism regarding its transition and near-term prospects.
Despite Intel’s (NASDAQ:INTC) claim that it is “in line with expectations” on forthcoming production nodes, evidence suggests the business still has unsolved problems, according to Citi analyst Christopher Danely, who had dinner with Intel (NASDAQ:INTC) Chief Executive Pat Gelsinger.
Danely noted in a message to clients that “our inspections show there is still some issue with attaining cost and margin targets.” Danely went on to say that INTC yields for both the 7 and 4 nm production nodes are “below plan,” citing those channel tests.
Early trading saw a drop in Intel’s (NASDAQ:INTC) share price of over 1% to $30.41.
Danely pointed out that Intel (NASDAQ:INTC) “lowered its guidance” for its third quarter, in addition to concerns about manufacturing challenges.
According to the firm, sales are now anticipated to be at the low end of the previously stated range of $15 to $16 billion, partly as a result of an inventory correction. Intel (INTC) stated in July that it expected revenue to be significantly lower than the $18.67 billion that analysts had predicted. Expected non-GAAP gross margins are 46.5% and 35 cents per share in earnings.
Danely restated his neutral recommendation on Intel’s (NASDAQ:INTC) shares, citing the possibility of “further downside” to consensus expectations as a result of weaker PC demand and the company’s ongoing market share loss to Advanced Micro Devices (AMD).
Separately, Ross Seymore of Deutsche Bank described the cut as a “soft pre-announcement” and said it supports previous statements made by Sandra Rivera and other officials of Intel NASDAQ:INTC) at a conference that Deutsche Bank recently attended.
Seymore wrote in a research note that “generally, [Intel’s] incremental pessimism is not surprising.” “And we are now much more skeptical of the [company’s] ability to fulfill its full year  target, which implied a high “snapback” even before this pre-announcement,” the statement continued.
Following the recent announcement, Seymore decreased his estimates for revenue and earnings per share by 5% to 10%, noting a “more lukewarm view on both PCs and data centers.”
Initiating research on Thursday, Stifel analyst Ruben Roy gave INTC a hold rating and a price objective of $32 per share, adding that the company’s turnaround strategy is viewed as “ambitious” and that the company’s timescale and technical roadmap are similarly.
“As [Intel] begins its multi-year transition strategy, we regard management’s schedule and technological road map ambitions as ambitious, and we expect competitive pressures to continue to intensify,” Roy said in a letter to clients.
According to Roy, over the previous six months, Intel (NASDAQ:INTC) shares have underperformed the Philadelphia Semiconductor Index and the S&P 500, with shares down 38% as opposed to declines of 25% and 11% for the corresponding indices.
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