Shares of Intel Corp. was up 5.7% before the opening bell on Friday, up as the chipmaker beat third-quarter earnings, slightly better-than-expected PC chip sales and a plan major cost cuts.
The performance of the stock is set to flick off down nine-quarters after earnings.
Intel’s
INTC,
results come between demand plunges for PC and a challenging macro environment. Against that backdrop, Intel shares are down 49% this year, outperforming the S&P 500 index
SPX,
20.1% decline.
On Thursday, Intel cut Its full-year outlook, predicts earnings of about $1.95 a share and revenue between $63 billion and $64 billion, citing “continued macroeconomic difficulties.” Wall Street had estimated earnings of $2.20 a share and revenue of $65.3 billion.
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Analysts are expressing their concerns about the company’s way forward. Truist Securities analyst William Stein wrote in a note released Friday: “Despite the ‘sink’ guide, we cannot recommend INTC until we see the path to success. to lead in products and processes. Truist lowered Intel’s price target to $29 from $40.
On Thursday after the market close, Intel announced plans to reduce costs by $3 billion by 2023. This figure will grow to $8 billion to $10 billion in annual cost reductions and efficiency gains. results by the end of 2025, according to the chip maker. “Despite worsening economic conditions, we delivered solid results and made significant progress in our product and process execution during the quarter,” said Intel CEO Pat. Gelsinger said in the earnings announcement. The company is “aggressively addressing costs and driving efficiency across the enterprise,” he added.
On a conference call with analysts, Gelsinger also discussed “our efforts to optimize headcount.”
Intel also launched the next phase of its IDM 2.0 strategy. Launched in March 2021, Manufacturing Equipment Integration 2.0 aims to overhaul the company’s design and manufacturing processes, with an “in-house foundry model” at the heart of the effort. “As we begin the next phase of IDM 2.0, we are focused on adopting an in-house foundry model to enable our production team and business units to be more agile, making decisions better decisions and establish a leading cost structure,” said Intel CFO David Zinsner in the earnings release.
Read it now: Intel stock set to snap nine-after-decreasing earnings of the company
Oppenheimer analyst Rick Schafer wrote in a note released Thursday: “This decouples design and manufacturing, allowing for greater transparency and structural efficiency. “INTC’s design teams become the company’s customers, equal to external customers.”
“Management seems to be taking a more pragmatic view of operations and investments,” Wedbush analyst Matt Bryson said in a note released on Wednesday. Six, indicates Intel’s plan to reduce costs and separate foundry operations from product businesses to increase efficiency. Intel also lowered its 2022 capital expenditure forecast to $2 billion.
However, the company still has many challenges ahead. Bryson writes: “While we believe a more conservative approach to spending (while still investing in future conversions), we are concerned that INTC makes future assumptions about the future. the future is too optimistic.” The analyst points out that Intel’s outlook for the Whole PC Defined Market is between 270 million and 290 million by 2023. According to him, this looks ambitious based on macro trends. , highlighting the change in market share for Apple Inc.
AAPL,
M Series processors and solid competition from Advanced Micro Devices Inc
AMD,
He added: “With a lot of headwinds potentially affecting the 2023 results and operational improvement still an aspiration going forward, we remain negative for INTC. Wedbush has an underperforming rating for Intel.
Oppenheimer has a performance rating above Intel. “We remain on the sidelines as INTC’s extensive turnaround efforts have been proven,” Schafer writes. “The company remains in proof mode as mgmt drives capacity expansion and returns to process leadership.”
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Of the 37 analysts surveyed by FactSet, seven had an overweight or buy rating, 21 had a hold rating, and eight had an underweight or sell rating.
