Intel Beats Q2 Estimates but Issues a Weak Q3 Outlook

Intel Beats Q2 Estimates but Issues a Weak Q3 Outlook
July 27, 2020

 

Intel Corp. (INTC) reported fiscal 2020 second-quarter profits and earnings that exceeded the Street expectations. Despite the announcement of impressive quarterly results, the stock has turned bearish as the semiconductor manufacturer issued a lower-than-anticipated Q3 earnings outlook. Notably, the company has restarted issuing its FY 2020 outlook. Intel also revealed that the next-generation chips would be unveiled a bit later than initially expected. On Friday, the stock closed at $50.59, down $9.81 or 16.24%.

The Santa Clara, California-based company, reported second-quarter revenues of $19.70 billion, up 20% from $16.50 billion in the comparable quarter last year. Analysts surveyed by Refinitiv had anticipated revenues of $18.55 billion for the quarter.

For the quarter ended June 27th, the company posted Q2 earnings of $5.10 billion, or $1.19 a share, an increase from $4.20 billion, or $0.92 per share, last year.

Excluding charges, adjusted earnings for the second quarter were $1.23 per share, compared with $1.06 per share in the year-ago period. Analysts polled Refinitiv had anticipated earnings of $1.11 per share for the reported period.

Commenting on the results, Bob Swan, CEO of Intel, said, “It was an excellent quarter, well above our expectations on the continued strong demand for computing performance to support cloud-delivered services, a work- and learn-at-home environment, and the build-out of 5G networks. In our increasingly digital world, Intel technology is essential to nearly every industry on this planet. We have an incredible opportunity to enrich lives and grow this company with a continued focus on innovation and execution.”

Segment-wise,

  • Client Computing Group, Intel’s top business division, generated revenue of $9.50 billion in Q2, reflecting a 7% increase on a yearly basis, and surpassed the FactSet survey estimate of $9.10 billion. Gartner, which predominantly conducts surveys related to the computer industry, has stated that the second-quarter PC shipments are comparable to Q2 2019 growth, following a drop in the first quarter due to the COVID-19 pandemic.
  • Data Center Group, which concentrates on semiconductor chips for server manufacturers and cloud providers, recorded $7.12 billion in revenues, an increase of 43% y-o-y and higher than the $6.61 billion FactSet Consensus.
  • Non-Volatile Memory Solutions Group posted revenues of $1.66 billion, mirroring 76% y-o-y growth and beating analysts’ estimates of $1.29 billion.

The company attained record Q2 revenues, driven by 34% data-oriented revenue growth and 7% PC-focused revenue growth.  Cloud, memory, notebook, and 5G products enabled the business segments to record strong growth.

Going forward, the company anticipates Q3 revenues of roughly $18.20 billion and adjusted earnings of about $1.10 a share. Analysts currently expect earnings of $1.14 a share on revenues of $17.90 billion.

A quarter before, Intel decided to suspend issuing forecasts for a full-year. However, while reporting second-quarter results, it has resumed issuing forecasts for full-year. For FY 2020, Intel anticipates revenues of about $75 billion and adjusted earnings of $4.85 a share, reflecting a growth of 4%. Earlier in January, the company had forecast earnings of $5 per share on revenues of $73.50 billion. Analysts currently anticipate earnings of $4.81 per share on revenues of $73.86 billion.

The company postponed the launch of semiconductor chips embedded with tiny 7-nanometer transistors for better performance as it vies to close the gap with AMD, which has already launched 7-nanometer chips. The company identified a problem in the 7-nanometer chip manufacturing process that resulted in a lower output of issueless chips. Therefore, the launch of 7-nanometer chips, which was originally scheduled for 2021, has now been postponed. The company is now focusing on scaling up production of 10-nanometer chips, which were launched after a considerable delay.

Currently, Intel intends to deliver the first batch of 7-nanometer chips in the final leg of 2022 or the first quarter of 2023, as per Bob Swan, CEO of Intel.

Swan stated: “We will continue to invest in our future process technology roadmap, but we will be pragmatic and objective in deploying the process technology that delivers the most predictability and performance for our customers, whether that be on our process, external foundry process, or a combination of both.”

During the quarter, Intel announced the takeover of Moovit, an autonomous vehicle-related startup, for $900 million. Furthermore, the company divested its home gateway platform division to MaxLinear for $150 million. The company also unveiled new chips for laptops and gaming PCs.

The weak Q3 earnings outlook and postponement of the 7-nanometer chip launch are expected to keep the stock of Intel bearish in the short-term.

The historical price chart indicates that the stock has closed below the 50-day moving average. The stochastic indicator is also declining towards the bearish zone. Furthermore, the stock is facing resistance at 60. The next support is anticipated only near 40. Therefore, we are anticipating the stock to decline further in the short-term.

int - technical analysis - 27th July 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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