Intel stock down 10% on Q4 results: buy the dip?

By:
on Jan 26, 2023
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  • Intel reports disappointing Q4 results and issues weak guidance.
  • Bernstein's Stacy Rasgon reiterates his underperform rating on INTC.
  • Intel stock is now trading at the same price at which it started 2023.

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Shares of Intel Corporation (NASDAQ: INTC) slid nearly 10% in extended trading after the chipmaker reported disappointing results for its fourth financial quarter.

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Intel stock down on weak guidance

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What weighed on the stock further was the company’s guidance that also missed expectations.

Intel forecasts 15 cents of adjusted per-share loss for Q1 on up to $11.5 billion in revenue. In comparison, analysts had called for 25 cents of adjusted EPS on $13.93 billion revenue. Reacting to the earnings print on CNBC’s “Closing Bell: Overtime”, Bernstein’s Stacy Rasgon said:

I don’t think they’ve had an $11 billion quarter since 2010. Gross margins of 39% is astonishing. You’re getting into commodity semiconductor kind of ranges for gross margins down. I’ve never seen anything like this before.

Data Centre revenue took a hit again

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Intel did not offer a guide for the full year. If it does on the earnings call that you can tune into HERE, Rasgon is convinced that it’ll be much weaker than where the Street is at as well. Intel stock is now roughly flat year-to-date.

Part of the weakness this quarter was related to the slowdown in personal computers but the data-centre side of Intel’s business, as per the Bernstein analyst, isn’t doing all that well either.

Their data centre business has actually been weakening for quite a few quarters. It made a little money this quarter. But it used to run at 50% operating margin. It’s getting worse.

Data Center and AI business was down 33% this quarter.

Should you buy Intel stock?

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Stacy Rasgon reiterated his “underperform” rating on the Intel stock following the earnings report.

His price target of $23 suggests a more than 20% downside from the price at which shares closed the regular session today. Attributing Intel’s doom partly to management, the analyst said:

They had an investor day in February last year and put out revenue target that were outlandish. Headcount is up 20% since Pat Gelsinger took the job. So, they were hiring and planning for a different revenue environment than we are in. So, clearly, there are execution issues here.

Intel Q4 financial highlights

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  • Lost $664 million that translates to 16 cents per share
  • Had $4.62 billion of net income a year ago ($1.13 a share)
  • Adjusted EPS printed at 10 cents as per the press release
  • Revenue tanked 31% year-over-year to $14.04 billion
  • Consensus was 21 cents of EPS on $14.49 billion revenue
  • Gross margins also declined from 55.8% to 43.8%
  • Declared quarterly per-share cash dividend of 36.5 cents
  • Revenue from Cloud Computing Group was down 36%
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