Intel Nosedives 10%+ Despite EPS Beat: Tipping Point or Buying Opportunity?
Investing.com | Jan 26, 2024 06:49AM ET
- Intel's fourth-quarter earnings led to a more than 10% premarket dip in its stock, despite beating estimates.
- While the report offered some respite after a period of disappointment, the Q1 outlook fell below expectations, sparking concerns about the company's path to recovery.
- Investing Pro's Fair Value aligns with the market reaction, signaling a bearish trend ahead.
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Intel (NASDAQ:INTC) stock experienced a more than 10% decline in premarket trade on Friday following the chipmaker's fourth-quarter earnings, which exceeded estimates but presented an outlook for the current quarter that fell below expectations.
After a steady period of earnings disappointment, yesterday's report was meant to give investors some respite.
Source: InvestingPro
Adjusted EPS was $0.54, compared to the $0.45 estimate while adjusted revenues were $15.406 billion, beating the $15.170 billion estimate and more than $300 million above the October guidance.
Many anticipated that the company would release results that would disappoint the market, reinforcing the pessimistic sentiment surrounding the chip manufacturer
This occurred in both the second and third quarters, surpassing conservative earnings estimates by returning to profitability ahead of schedule and offering an optimistic outlook for the future.
Consequently, the stock experienced a significant rally over the past year, doubling in value and instilling hope among many investors.
Despite the hint of a return to its best, Intel remains far from its heyday when it generated quarterly sales of more than $20 billion in 2021 alone.
Breaking it down, Client Computing (the PC chip business) reported sales of $8.84 billion, surpassing the estimated $8.42 billion, while data center and artificial intelligence revenue amounted to $4.0 billion, falling short of the projection of $4.08 billion.
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Furthermore, Network & Edge billed $1.47 billion, missing estimates of $1.55 billion, while Mobileye billed $637 million, exceeding the estimated $627.2 million.
Finally, Intel Foundry Services billed $291 million, also falling short of estimates by $342.5 million.
The adjusted operating profit was $2.58 billion, surpassing the estimated $2.1 billion, and the adjusted operating margin reached 16.7 percent, beating estimates by 13.9 percent.
However, R&D expenses were $3.99 billion, slightly exceeding estimates of $3.9 billion.
Looking forward, what raises concerns is that Intel continues to experience a downward trend in key financials.
Revenues are projected to be in the range of $14.5 billion to $15.1 billion, with a gross margin of 44.5% (estimates of 45.5% and down from current estimates), resulting in an EPS of $0.45.
Source: InvestingPro
The outlook suggests that Intel still has a long way to go before it can restore and return to past levels, even judging by the market reaction.
Investing Pro's Fair Value confirms the bearish trend in the coming months and the current overvaluation of the stock.
Source: InvestingPro
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