Intel Corp.’s latest earnings report has garnered mixed reactions from the market. While some analysts praise the company’s performance, others have concerns about its future prospects.
The Positive
Bernstein analyst Stacy Rasgon acknowledges that Intel’s second-quarter results exceeded expectations, highlighting the impressive performance of its data-center and client-computer businesses. Despite being a previous critic, Rasgon now holds a more neutral stance on the company, admitting to warming up to Intel’s story. However, he still points out that there are significant challenges ahead for the company.
Objectively Bad
Rasgon does not shy away from calling Intel’s earnings “objectively bad.” He highlights the continued near-term headwinds in the data-center sector, the loss-making key businesses, and the ongoing cash burn of $3 billion. These factors contribute to his cautious approach towards Intel.
Industry Perspective
Truist Securities analyst William Stein also expresses a measured viewpoint. While he acknowledges Intel’s two consecutive “good” quarters, he advises against getting too excited. Stein questions the long-term market potential of Intel’s x86 processor and suggests that if a lasting turnaround is on the horizon, investors will have ample time to evaluate its success.
Stein raises concerns about Intel’s shift in spending towards high-end artificial intelligence systems and the competitive risks posed by Nvidia Corp. Despite acknowledging Intel’s improved execution in recent quarters, he believes there could be a lasting problem in this evolving landscape.
Market Reaction
Following recent high-profile missteps, Wall Street seems somewhat relieved by Intel’s earnings report. The company’s fairly low-drama performance has led to a 6% increase in premarket trading.
Conclusion
While there are positive aspects to Intel’s earnings report, such as its strong performance in certain sectors, there are also concerns about data-center headwinds, money-losing businesses, and cash burn. Analysts express cautious optimism and a need for Intel to address these challenges. The market remains cautiously optimistic, but long-term prospects and competition from Nvidia are factors that Wall Street will continue to monitor closely.
Intel’s Recovery Quarter With Mixed Implications
Analysts Assess Intel’s Performance
In June, Intel experienced what Hans Mosesmann of Rosenblatt Securities called “a solid recovery quarter.” However, he believes that the implications for the company’s shares are mixed due to an uncertain data-center trajectory. According to Mosesmann, data-center momentum is crucial for any bull case regarding Intel.
Intel has set long-term goals and is slowly delivering on them, signaling a prolonged ramp, wrote Mosesmann. He acknowledged that the company is currently executing well, despite starting from a weak position. However, only time will reveal the true trajectory.
Mosesmann rates the stock as a sell with a target price of $17.
Positive Signs of Execution
C.J. Muse from Evercore ISI noted that Intel’s results and commentary indicate that management is effectively executing its plan, which Muse described as a breath of fresh air for the company.
Muse highlighted that Intel’s operating expenses are lower than expected, while the company remains on track with its cost savings and is making progress in areas such as product and process roadmaps. Additionally, Intel is advancing its build plans at its Arizona fab.
Overall, Muse considers this quarter as a solid one for Intel, showing positive signs of execution in areas within the company’s control. He referred to Intel’s tagline for its foundry ambitions, IDM 2.0 strategy, when discussing the progress made.
Muse maintains his in-line rating on Intel shares but sees it as a tactical long-term investment as earnings continue to rise. He has increased his price target from $36 to $40.
The Path to Success
Although challenges remain for Intel to fully materialize CEO Pat Gelsinger’s IDM 2.0 vision, C.J. Muse believes the company is moving in the right direction.
While remaining cautious about Intel’s positioning in a changing computing paradigm and competitive landscape, Muse acknowledges that if the company succeeds in its plan, there is significant potential for the stock to rise.
In conclusion, Intel’s recovery quarter showcased positive execution and progress towards its long-term goals, indicating a hopeful future.
