Intel stock price has continued to plummet this week with the ticker (INTC.O) seeing a shocking $8 billion decrease in its market value off the back of recent earnings. On Friday, Intel’s stock price saw a decline following dismal earnings projections that beat down Wall Street expectations.
Intel recently announced that their expected revenue for the first quarter is lower than initially estimated, with a surprise loss of $3 billion making up part of this shortfall. Additionally, the data center business is seeing a slowdown in growth which further dampens their outlook. See the full financial report here.
Intel stock price takes a tumble
Intel’s share price closed 6.4% lower, whilst their competitors AMD.O (Advanced Micro Devices) and Nvidia (NVDA.O) achieved a more positive result, finishing 0.3% and 2.8% up respectively. KLA Corp (KLA.O), one of Intel’s suppliers, was also adversely affected with their forecast leading to a 6.9% drop in share price.
According to Hans Mosesmann of Rosenblatt Securities, who was among the 21 analysts to lower their price targets on Intel’s stock, “No words can portray or explain the historic collapse of Intel.”
Chief Executive Pat Gelsinger faces an uphill battle in his quest to restore Intel’s dominance of the sector, as made evident by the poor outlook. In order to achieve this, he has proposed expanding Intel’s contract manufacturing and constructing new factories in Europe and the United States. This should help strengthen their position in the market, but their competitors continue to overtake Intel’s former market dominance.
Comparison to rivals not helping Intel stock price
Intel’s market share has been gradually slipping away to competitors like AMD, who have turned to contract chipmakers – like Taiwan-based TSMC (2330.TW) – with the aim of producing chips that surpass Intel’s technology. This has only exacerbated the challenges posed to Intel’s CEO, Pat Gelsinger, in his mission to restore Intel’s dominance of the sector. Will Intel be able to play catch up with their competitors to ensure their survival after having such a strong grip on the sector.
According to analysts, Intel’s struggles could worsen even further by the second half of 2023 when the data center market is expected to reach its lowest point. This puts Intel at a severe disadvantage as they would have lost more share by that time, making their recovery efforts much more difficult.
Bernstein brokerage recently noted that it is now obvious why Intel has to take such drastic measures to reduce costs, seeing as their original plans have been proven to be impractical. Intel’s recovery plan would need to be strong in order to counteract the deficits.
“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”
In the fourth quarter, Intel was able to generate $7.7 billion in cash from operations and paid dividends of $1.5 billion. In light of these figures and considering their looming capital expenditure of approximately $20 billion in 2023, analysts have suggested that Intel should consider reducing its dividend payout in order to further cut costs.
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