Intel stock hits lowest price

Intel stock hits lowest price in more than a year, and there is another shoe to drop


Intel Corp. weathered another tough investor reaction to its earnings report Thursday, and analysts say the chip maker faces another potential challenge in addition to falling margins: A looming oversupply of PCs that promises to hit its largest business segment.

Shares of Intel INTC, -7.04% fell more than 6% Thursday and hit an intraday low of $47.78, their lowest trade since Dec. 22, 2020, when they touched $45.77. The stock was Thursday’s worst performer on the Dow Jones Industrial Average DJIA, -0.02%, which was flat.

The stock was headed for the seventh-straight quarter in which it fell the day after earnings were reported, even though Intel beat earnings expectations each time. The average one-day post-earnings decline after the previous six earnings reports has been 9.7%, according to FactSet data.

While the chip maker easily topped Wall Street estimates for the quarter in an earnings report late Wednesday, results showed a 7% decline in revenue from client computing, the traditional PC group and Intel’s largest business unit, to $10.1 billion, which was higher than Wall Street’s estimate of $9.59 billion.

The company’s forecast elicited concern, however, not just because Intel reported that fourth-quarter margins fell to 55.4% from 60% in the year-ago quarter, but because of signs the PC boom that Intel has enjoyed is swiftly coming to an end.

For the first quarter, Intel forecast adjusted first-quarter earnings of 80 cents a share on revenue of about $18.3 billion, while analysts surveyed by FactSet on average had expected earnings of 86 cents a share on revenue of $17.61 billion. The company is holding off on giving an annual guidance until its Feb. 17 investor day.

Outside of the falling margins question, which has been on the table since last quarter, analysts seemed to be more concerned this time around with how an expected drop in PC growth will hurt Intel as it’s trying to rebuild itself.

Bernstein analyst Stacy Rasgon, who has an underperform rating and a $40 price target, in a note entitled “Purgatory,” noted that Intel’s forecast “could conceivably be weaker than it appeared on the surface” because the first quarter contains an extra week compared with a year ago.

From there, the analyst focused on a forecast correction in PC growth that appears on the horizon. In 2021, PC shipments hit their highest levels in nearly a decade fueled by the COVID-19 pandemic.

“PC CPUs [central processing units] (which we have believed were overshipping, particularly in notebooks) are now definitively entering correction which may make unit growth next year challenging even if PCs stay strong, and the datacenter trajectory is being driven by likely unsustainable enterprise strength (+53% [year-over-year]) with 5 quarters in a row of cloud declines (worrisome),” Rasgon said.

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