Intel (INTC) Stocks Plummet Due to Disappointing Early 2024 Projection

 Intel (INTC) exceeds expectations, but faces AI and manufacturing challenges impacting Q1 2024 outlook and seven-quarter revenue recovery, challenging investor confidence.  

Highlights

• Intel surpasses earnings per share (EPS) and revenue projections, outperforming Wall Street expectations.
• Q1 2024 forecast misses targets, prompting investor apprehension.
• Company strategy emphasizes AI and semiconductor manufacturing in response to market changes.
• Shares decline by 5% in the after-hours market.

Intel's Earnings Performance and Anticipated Outlook

Intel (INTC) witnessed a decline in after-hours trading on Thursday following its less-than-optimistic first-quarter forecast for 2024, yet despite this setback, the company's latest quarter results exceeded Wall Street's expectations.

Outperforming Earnings and Revenue Projections

Intel delivered an adjusted EPS of 54 cents, surmounting the estimated 45 cents, and achieved a revenue of $15.4 billion, surpassing the anticipated $15.15 billion. This marks a noteworthy turnaround, ending a seven-quarter streak of declining revenue.

Anticipated Performance for Q1 2024

However, the first quarter of 2024 appears less promising. Intel anticipates an EPS of 13 cents with sales expectations ranging from $12.2 billion to $13.2 billion, notably lower than the LSEG consensus of 33 cents per share and $14.15 billion in revenue.

Intel's Strategic Focus under CEO Pat Gelsinger

Under CEO Pat Gelsinger’s five-year plan, Intel aims to compete with Taiwan Semiconductor Manufacturing Company in manufacturing services while enhancing its own branded chips. The company is also optimizing its operations through workforce reductions and divestitures, including the spinoff of its programmable chip unit and the transformation of Mobileye into an independent entity.

Assessment of Business Performance

While Intel's Client Computing group, its largest division, reported a 33% increase in sales totaling $8.8 billion, the Data Center and AI segment witnessed a 10% decline in sales, amounting to $4 billion. Additionally, Intel’s foundry services experienced a 63% annual revenue increase, albeit from a smaller embedded base.

Initial Estimates and Market Response

Prior to the earnings report, Intel’s stock had surged by 65% over the last year, outperforming the S&P 500 index. With strong Q3 results and strategic advancements in AI and CPU businesses, analysts held high expectations. Despite this, the forecasted revenue decline for the full year and sluggish performance in the data center and client computing group may dampen investor enthusiasm.

Short-Term Market Projection

The report's mixed outcomes - a robust earnings beat coupled with a cautious outlook for Q1 2024 - suggest a bearish trend for Intel shares in the immediate future. Investors are anticipated to respond cautiously, closely weighing the challenges in the data center segment and the broader PC industry, notwithstanding Intel's strategic shifts and cost-saving measures. The market's watchful eye will remain fixed on Intel's execution of its long-term strategy, balancing immediate financial pressures with the potential for future growth in AI and chip manufacturing.