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Intel expected to post biggest loss on record: Has chip maker finally hit bottom?


Intel Corp. is expected to post its worst quarterly loss on record Thursday, and analysts are hoping it is rock bottom for the struggling chip maker.

Intel
INTC,
+1.06%

is scheduled to report earnings after the close of markets on Thursday, and analysts on average expect the Silicon Valley giant to report a loss of more than $3 billion, or 76 cents a share, according to FactSet. That would be by far the largest quarterly loss on record for the company. In records dating back to 1993, Intel has never reported a GAAP loss of more than $687 million, according to Dow Jones Market Data.

Even on an adjusted basis, Intel’s loss is expected to be historic. The company is expected to lose 16 cents a share after adjusting for stock compensation and other costs. Records dating back to 2009 do not show the chip maker ever posting an adjusted quarterly loss, Dow Jones Market Data reports.

Intel executives predicted an adjusted loss for the quarter in January, when analysts on average were expecting adjusted profit of 25 cents a share. The chip maker is struggling with macroeconomic uncertainty, inventory buildups in the personal-computer market and a struggling data-center business that is losing share to rival Advanced Micro Devices Inc.
AMD,
+3.19%
.

In-depth: How Intel lost its Silicon Valley crown

The one bright side Wall Street analysts see in the expected historic loss is that it should represent a bottom for Intel. Susquehanna Financial Group analyst Christopher Rolland predicted that “the major resets for Intel are likely behind us.”

Rolland sees the first quarter as “likely marking the bottom for PC client,” while for data center, he expects results in line with Intel’s “dour guidance.”

The analyst, who has a neutral rating on Intel and a $33 price target, feels the company should grow in the second quarter, “marking the bottom for this horrible PC/DC downcycle,” and hopes the company will finally provide a full-year sales outlook, which he estimates will reflect a decline of more than 20% to between $47 billion and $50 billion.

Analysts surveyed by FactSet expect full-year earnings of 53 cents a share on revenue of $50.55 billion.

Other earnings reports this week have definitely reframed Intel’s earnings on Thursday. Late Tuesday, Texas Instruments Inc.
TXN,
-1.81%

topped expectations for results, issued a cautious forecast, and provided some much-needed end market visibility to analysts looking for a bottom to the chip glut.

Read: Texas Instruments stock boosted by more end-market visibility as outlook comes in light

Following TI earnings, Susquehanna’s Rolland said PC builds were above his expectations in February and March “likely marking the market bottom.”

Additionally, on Wednesday, Mizuho desk analyst Jordan Klein said comments from TI and Microsoft Corp.
MSFT,
+7.78%

earnings “sure sounded a lot like PC pretty close to a bottom.”

“Intel will be a much better read this week (I remain positive),” Klein said. “My positive Intel view here is driven partially by PC market troughing [in the second quarter] and some refill / replenishment starting [third quarter] onward.”

Read: Tech hardware was already struggling, but ‘market conditions have deteriorated’ even more

Bernstein analyst Stacy Rasgon, who recently upgraded Intel to market perform even though he doesn’t “like the stock,” said that with Intel’s business suffering “a total abject collapse last quarter amid PC and datacenter market weakness as well as a channel flush,” the bar may be low enough for the chip maker to start clearing it.

“For the first time in a long time we are starting to feel like numbers at least into the [second half] could (finally?) be low enough, as even in a weak environment the company is now likely undershipping by a wide margin (which should provide some support as things eventually normalize) and [has] new datacenter products getting ready to ship in broader volumes,” Rasgon said.

Evercore ISI analyst C.J. Muse, who has an in-line rating on Intel, said risk/reward “remains excellent” on the stock, and that Intel may have undershipped PC demand by about 30% to 40% in the first quarter alone. Muse expects a slight miss from Intel with “a return to growth” in the second quarter “as inventory burn headwinds abate.”

Read: Nvidia CEO expects AI revenue to grow from ‘tiny, tiny, tiny’ to ‘quite large’ in the next 12 months

After the bell Wednesday, KLA Corp.
KLAC,
+0.33%

reports, following last week’s reports from Lam Research Corp.
LRCX,
+0.10%

and ASML Holding NV
ASML,
+0.98%
.
Muse, who has an in-line rating on KLA, said that he expects the company, like Lam, to guide June-quarter revenue below consensus “amid modest pushouts from Memory and Foundry and only gradual improvement in EPC, amid PC/Smartphone weakness.”

Read: Lam Research revenue declines, and that is not expected to change

Teradyne Inc.
TER,
-0.56%

and Wolfspeed Inc.
WOLF,
+2.95%

also report after the bell Wednesday.

Read: ASML stock struggles as near-term inventory challenges compete with potential 2024 rebound

Year to date, Intel’s stock has lagged behind tech, rising 11% compared with the PHLX Semiconductor Index’s
SOX,
+0.96%

nearly 16% increase and the tech-heavy Nasdaq Composite’s
COMP,
+0.96%

14% gain. Meanwhile, the S&P 500
SPX,
+0.05%

has advanced 6% and the Dow Jones Industrial Average
DJIA,
-0.23%

— which counts Intel as one of its 30 components — has ticked 1% higher on the year.

Read: Lam, TSMC, chip-making equipment supplier stocks rally as shaky results point to expected recovery in 2024

Read also: Taiwan Semiconductor predicts revenue will fall this year but maintains spending outlook



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