Why Intel (INTC) Stock Is Trading Lower Today

Kayode Omotosho /
2024/04/26 1:21 pm EDT

What Happened:

Shares of computer processor maker Intel (NASDAQ:INTC) fell 10.9% in the morning session after the company reported first-quarter results, with revenue and EPS falling below Wall Street's expectations. Specifically, revenue in the "All Other" segment, which includes Altera and Mobileye, fell below expectations due to inventory headwinds. Intel observed slightly weaker-than-expected trends during the quarter and called out near-term supply constraints. As a result, guidance wasn't encouraging, as revenue and EPS guidance for the next quarter both missed analysts' expectations by a meaningful magnitude. 

However, management expects Q1 to be the bottom as headwinds fade and guided for sequential revenue growth to improve heading into 2025. The rebound is expected to be driven by 1.) Enterprise refresh cycle and growing momentum for AI PCs. 2.) Data center recovery with a return to more normal CPU buying patterns and ramping of accelerator offerings. 3.) Cyclical recoveries in NEX, Mobileye, and Altera. 

Overall, this was a mediocre quarter for Intel with the markets likely not convinced by the rebound narrative.

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What is the market telling us:

Intel's shares are somewhat volatile and over the last year have had 13 moves greater than 5%. But moves this big are very rare even for Intel and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 23 days ago, when the stock dropped 7.4% on the news that the company announced a new financial reporting structure, which revealed wider-than-expected losses in its Foundry business. According to the press release, the newly established Foundry segment recorded operating losses of $7 billion in 2023, while sales clocked in at $18.9 billion. This meant profit margins were worse compared to 2022 when it recorded operating losses of $5.2 billion on $27.5 billion in sales. The company expects operating losses to peak in 2024, alongside expectations for breakeven operating margins before the end of 2030. 

Also, Intel provided long-term growth and profitability projections. CFO Dave Zinsner added, "This model is designed to unlock significant cost savings, operational efficiencies, and asset value. As it begins to take hold, we expect to accelerate on our path toward achieving our ambition of 60% non-GAAP gross margins and 40% non-GAAP operating margins in 2030." Lastly, Intel announced the appointment of Lorenzo Flores as Chief Financial Officer of Intel Foundry, effective April 8, 2024.

Intel is down 33.7% since the beginning of the year, and at $31.71 per share it is trading 37.5% below its 52-week high of $50.76 from December 2023. Investors who bought $1,000 worth of Intel's shares 5 years ago would now be looking at an investment worth $604.81.

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