Intel launched its 12th Gen Intel Core processors in January.
Courtesy Intel Corporation
Intel shares are inching higher ahead of the chipmaker’s fourth-quarter earnings report, due after the close of trading on Wednesday.
Intel (ticker: INTC) and other personal-computer-related stocks are getting a boost from the strong financial results reported late Tuesday from Microsoft (MSFT), which included better-than-expected demand for the company’s Windows operating system software, especially for commercial PCs. Intel shares were 1.7% higher, at $51.88, in recent trading, with Advanced Micro Devices (AMD), HP Inc . (HPQ), and Dell Technologies (DELL) showing similar gains. Microsoft was up 4.1%.
Intel’s guidance for the quarter calls for $18.3 billion in revenue and profits of 90 cents a share, which implies full-year revenue of $73.5 billion and $5.28 a share. Street estimates are right in line with guidance. While some analysts think the results could top guidance, for Intel the focus is less on near-term performance and more on its progress on revamping its business model and building out capacity.
Last week, for instance, the company announced a plan to invest more than $20 billion to build out two new chip fabrication plants in Ohio. Almost a year ago, CEO Pat Gellsinger laid out the company’s new manufacturing strategy, including a $20 billion program to build two new fabs in Arizona.
For the March quarter, Street consensus calls for revenue of $17.6 billion and profits of 86 cents a share. Full-year 2022 consensus projects $73.4 billion in sales, with profits of $3.69 a share.
Morgan Stanley chip analyst Joseph Moore says he doesn’t expect any big surprises this quarter, asserting that the company’s ongoing high capital spending likely limited upside for the stock.
Moore, who has an Equal Weight rating on Intel shares, wrote in a recent preview note that he sees a mixed PC market, with strong desktop and enterprise trends but weaker demand in notebooks and the consumer market. He says server demand is generally stronger, but that Intel continues to see market-share pressure in the cloud versus both AMD and ARM-based processors. While Moore thinks the stock looks “compelling” on a multiple of sales basis, he says the ongoing heavy costs for fab buildouts “limits our enthusiasm longer term.”
Susquehanna Financial Group analyst Chrisopher Rolland argues that fourth-quarter and first-quarter consensus estimates “appear beatable,” given conservative guidance and a strong PC environment. But he thinks risks remain as the work-from-home trend fades late in 2022. He says previous shortages of low-end PCs and Chromebooks for the education market have eased. He maintains a Neutral rating on Intel shares.
Wedbush analyst Matt Bryson recently repeated his Underperform rating and $45 target price on Intel shares. His view is that while Intel is doing the right thing in boosting investment to restore its preeminent position in chip manufacturing, “the required increase in spending over the next few years will necessarily weigh heavily on company results.” And he notes that the payoff from the investment program won’t materialize until at least 2023.
Concludes Bryson: “With Intel effectively remaining in limbo through the current year as changes have yet to manifest in new products and with metrics still set to deteriorate as competition weighs on share, we see no reason to shift our view and remain sellers of Intel.”
Write to Eric J. Savitz at [email protected]
