Intel’s ‘inexcusable’ earnings show it can’t forecast its own results, says analyst

This is not investment advice. The author has no charge in any of the mentioned actions. has a disclosure and ethics policy.

After releasing its earnings report for the second quarter of fiscal 2022 earlier this week, chipmaker Intel Corporation is the subject of hard-hitting analyst coverage from a slew of Wall Street firms. Intel’s latest earnings caused the company’s revenue and net income to fall 22% and 109% annually, respectively, with management attributing the low revenue to the current economic downturn and the net loss to high capital expenditures. , as it seeks to regain technological leadership in the chip manufacturing process. and establish a solid foundation in the contract chip manufacturing industry.

After the earnings, Wall Street analysts almost unanimously lowered Intel’s share price targets and published notes with a variety of criticisms. One of them came from Northland, who expressed surprise at Intel’s apparent lack of preparation for the disappointing earnings report.

Intel should have previously announced Q2 results, says Northland analyst

At least seven Wall Street analysts covering the semiconductor industry cut Intel’s share price the day after the release of its second-quarter 2022 earnings report. The lowest of these came from Rosenblatt, which cut its price target of $10 to $30, called the earnings an “absolute disaster” and also questioned why the results were not previously announced. The analyst also warned that Intel’s data center market will suffer in the coming years.

The second-lowest price target came from research firm Susquehanna, which lowered it from $40 to $33, stating that despite a desire to believe the earnings report was a one-time occurrence, there are persistent problems with the business model of Intel that warrant caution for years to come. to come. These include the growing popularity of Arm-based data center processors, AMD’s rapid rise in the personal computing space, and heavy capital expenditures that will continue to weigh on net income in the context of downside risks. shrinking the personal computing market.

A breakdown of Intel’s revenue and operating income for the second quarter of 2022 (Q2 2022). Image: Intel Corporation

Northland analyst Gus Richard has the highest price target for the company in our sample today, having lowered it from the previous $62 to a more modest $55. However, in his comments, Richard criticized the company, saying the earnings report was inexcusable. The analyst went on to add that the inexcusable earnings report calls into question the company’s ability to manage its investor relations and shows that perhaps Intel lacks the ability to forecast its results in advance, as it did not previously announce earnings.

However, Richard maintained a moderate tone of optimism for the company, stating that he expects the second and third quarters to be the worst for Intel and that the results are not surprising given the historic turnaround the company is attempting.

Joining the chorus was Jefferies, which established a base case of Intel losing market share to NVIDIA and AMD in the PC, server, and data center markets. As for the advantages, the research firm pointed out that a model without a factory, the execution of the process technology and a possible poor execution of AMD can breathe new life into the company. In the long term, Jefferies highlighted that the growing switch to Arm is a major threat to Intel and that in his view the best long-term strategy for Intel will be to switch to a factory-less model through a joint venture with Taiwan Semiconductor Manufacturing. . Company (TSMC). In such a scenario, Intel would be better prepared to split capital expenditures with the US government and TSMC, as well as offer joint foundry services.

Leave a Comment