Understanding Bearish Signals on This Chipmaker’s Stock Chart

Intel Corporation (INTC) Stock prices almost plummeted 31% in April, recorded its worst month in more than two decades as the prominent chipmaker continues to struggle to execute a turnaround. Moreover, the stock price has fallen by about 40% since the beginning of the year.

Much of the INTC sale occurred after recent financial results that included a bleak outlook that indicated the company’s turnaround efforts would require more time and investment. Furthermore, Intel’s The factory was having difficulty operating. In March, investor concerns intensified.

Mixed first quarter results and weak outlook

city First quarter ended March 30, 2024, INTC’s net revenue increased 8.6% year-on-year to $12.72 billion. However, this fell short of analysts’ estimates of $12.78 billion. Additionally, revenue from the company’s foundry business fell 10% year-over-year to $4.4 billion.

The chipmaker’s gross profit rose 30.2% year over year to $5.22 billion. Operating loss was $1.07 billion, compared to $1.47 billion in the year-ago period. However, Intel Foundry posted an operating loss of $2.5 billion during the quarter. In 2023, this unit will Massive operating loss of $7 billion.

Additionally, INTC’s net income was $437 million compared to $2.77 billion in the same quarter of 2023. Additionally, loss per share attributable to Intel was $0.09 compared to $0.66 in the year-ago quarter. This beat the consensus loss per share estimate of $0.15.

Intel’s main business is manufacturing chips for PCs and laptops, which is classified under the Client Computing Group (CCG). The division’s revenue was $7.5 billion, up 31% from the previous year.

Intel also produces central processors for servers and other components and software, which are categorized under its Data Center and AI business segments. The segment’s revenue increased 5% year over year to $3 billion. However, chipmakers face stiff competition in the server market, especially AI chips from companies such as: NVIDIA Corporation (NVDA).

The company also expects second quarter fiscal 2024 revenue to range from $12.5 billion to $13.5 billion. Loss per share for the quarter is expected to be $0.05, and non-GAAP earnings per share are expected to be $0.10.

INTC recently revised its earnings guidance for this quarter in line with guidance from the U.S. Department of Commerce. Certain export licenses have been revoked. The plan was to send the chips to Chinese technology company Huawei.

On May 7, the chipmaker said in an 8-K filing with the SEC that it received notice from federal regulators “effective immediately revoking certain licenses for the export of consumer-related items to customers in China.”

On Wednesday, Intel announced that it expects second-quarter revenue to fall below the midpoint of its original range of $12.5 billion to $13.5 billion, following guidance from the Commerce Department. However, the company continues to expect its full-year sales and earnings to be higher than in 2023.

Intel faces fierce competition

INTC, a long-time leader in the semiconductor industry, faces fierce competition from the following competitors: AMD (Advanced Micro Device) And NVIDIA. Intel still dominates the PC chip market, but AMD is gaining ground in the server, desktop, and mobile segments. Latest numbers from Mercury Research.

Intel remains the leader in the server CPU segment with 79.2% market share during the first quarter. However, this is down from 82% in the same quarter last year, indicating a slight decline in market share. AMD, on the other hand, has benefited in this segment, rising from 18% a year ago to 23.6% in the first quarter of 2024.

Additionally, Intel’s market share in the mobile CPU sector was 80.7% in the first quarter of 2024, significantly higher than 83.8% in the same period last year. However, AMD’s 19.3% market share in the first quarter was up 3.1% from the same period in 2023. AMD also surpassed Intel’s 23.9% desktop share in the first quarter of fiscal 2024, up 4.7% a year ago.

Moreover, INTC continues to fight for server market share with rival NVDA, especially in the AI ​​chip space. nvidia commands About 80% of the AI ​​chip market It uses the graphics processor (GPU) that has been favored by AI builders over the past year.

In early April, Intel announced its Latest AI chip, Gaudi 3, as competition from NVDA intensifies. The company claimed that the new Gaudi 3 chip is more than twice as power efficient as Nvidia’s H100 GPU and can run AI models 1.5 times faster. It is also available in a variety of configurations, including a bundle of eight Gaudi 3 chips on a single motherboard or a card designed to fit into existing systems.

Intel has tested its chips on models such as Abu Dhabi-backed Meta’s open source Llama and Falcon. We highlighted that Gaudi 3 can play an important role in training or deploying models, including Stable Diffusion and OpenAI’s Whisper model for speech recognition.

Additionally, Intel is losing market share to competitors such as: Arm Holdings PLC (ARM)Samsung Electronics, and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM).

Analysts lowered their price targets for Intel stock.

Goldman Sachs analyst We lowered INTC’s target price significantly. We lowered our stock price from $39 to $34 and lowered our adjusted EPS estimates for the 2024-2026 period by an average of 18%. It also reaffirmed its ‘sell’ rating on the stock, which has been in effect since July 2020.

“We are concerned that the company will continue to cede wallet share within the overall data center computing market to companies like Nvidia and Arm,” Goldman analysts said.

meantime, Bank of America Corporation (BAC) We lowered our price target from $44 to $40 due to high costs, low growth, and fierce competition. According to BofA analysts, the bleak second-quarter earnings guidance highlights that “topline growth remains tepid due to limited AI exposure, while manufacturing utilization is low and costs are rising.”

They added that Intel’s “corporate position, U.S.-based manufacturing assets, and weak investor sentiment offer the potential for a turnaround.”

conclusion

INTC’s first quarter 2024 results beat Wall Street expectations for EPS but fell short on revenue. The chipmaker also gave a weak outlook for the current quarter.

After the U.S. Department of Commerce recently revoked certain chip export licenses to Huawei in a bid to curb China’s technology powerhouse, Intel revised its second-quarter revenue guidance, projecting it to be below its initial range of $12.5 billion to $13.5 billion.

INTC’s stock price fell more than 30% in April, its biggest decline since June 2002. Moreover, the stock is trading below the 50-day and 200-day moving averages of $38.33 and $39.74, respectively, indicating a downtrend.

Despite having dominated the semiconductor industry for over 50 years, INTC now faces stiff competition from competitors such as AMD, NVDA, TSM, Samsung, ARM, and others. Additionally, the ongoing AI boom has led to corporate spending shifting away from Intel’s traditional data center chips.

As competition intensifies with limited exposure to AI, doubts are growing about Intel’s future dominance in the semiconductor industry.

INTC CEO Pat Gelsinger told investors on the earnings call to focus on the company’s long-term potential.

Analysts expect INTC’s revenue to be $13.06 billion in the second quarter ending June 2024, up slightly from the previous year. However, EPS for this quarter is expected to be $0.11, down 18.2% year-over-year. During fiscal 2024, the chipmaker’s revenue and EPS are expected to reach $55.99 billion and $1.10, up 3.3% and 4.8%, respectively, from the previous year.

“2024 should mark the bottom for many aspects of the business, but the pace of recovery is unlikely to remain unclear,” Stifel said in a note to clients.

Considering INTC’s disappointing earnings guidance, regulatory concerns, and fierce competition, it may be prudent not to invest in this stock at this time.