Intel’s Disappointing Forecast Sends Shares Plummeting

Intel’s Disappointing Forecast Sends Shares Plummeting

Intel, one of the leading chipmakers in the world, experienced a significant drop in its share price, falling 12% on Friday. This decline marked the steepest drop since July 2020. The catalyst behind this downward spiral was Intel’s forecast for the current quarter, which fell well below analysts’ estimates. While Intel’s earnings report showcased impressive profits and revenues, the company’s projected adjusted earnings of 13 cents per share on $12.2 billion to $13.2 billion in sales for the quarter did not meet market expectations. This article will dive into the factors contributing to Intel’s disappointing forecast and its potential implications for the company’s future.

Market analysts were taken aback by Intel’s forecast, as it fell significantly short of their estimates. According to LSEG, formerly Refinitiv, analysts were expecting earnings of 33 cents per share on $14.15 billion of revenue for the quarter. Intel’s revenue guidance for the first quarter even fell below every analyst’s estimate, further intensifying concerns about the company’s outlook. It is important to note that while some segments of the semiconductor industry, particularly those catering to artificial intelligence chips, are experiencing robust growth, other areas such as Intel’s central processing unit (CPU) production do not enjoy the same momentum.

During the earnings call with analysts, Intel CEO Patrick Gelsinger shed light on the reasons behind the company’s lower-than-expected sales forecast for the first quarter. Gelsinger stated that weakness at Mobileye, a company in which Intel holds a majority stake, and in the programmable chip unit were impacting overall sales performance. However, Gelsinger expressed confidence in the “healthy” state of Intel’s core businesses, namely PC and server chips, albeit predicting sales at the lower end of the seasonal range. While this miss is undoubtedly concerning, Deutsche Bank analyst Seymour Ross highlighted that the factors contributing to the weakness primarily lay outside of Intel’s core CPU segments, offering a glimmer of encouragement for the company.

Implications for Intel

The aftermath of Intel’s disappointing forecast was felt strongly in the market, driving its share price down to $43.68. So far, the shares have experienced a 13% decline year-to-date, erasing a significant portion of the gains made in 2023. The negative market sentiment surrounding Intel’s performance has also had a ripple effect on future analyst estimates for the company. Consensus analyst estimates for Intel’s earnings in the second, third, and fourth quarters of 2024 all witnessed a downward revision in the wake of the forecast miss.

Intel’s recent earnings report and forecast for the current quarter showcased a mixed bag of results. While the company experienced success in terms of profit and revenue, its sales forecast fell woefully short of analysts’ expectations. This disparity led to a sharp decline in Intel’s share price and heightened concerns about the company’s future prospects. However, some analysts remain cautiously optimistic, citing that the weaknesses contributing to the forecast miss lie primarily outside of Intel’s core business segments. As the semiconductor industry continues to evolve and adapt to changing demands, it will be crucial for Intel to navigate these challenges to regain market confidence and drive sustainable growth.

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