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Is Intel Stock a ‘Sell’ after Its Q1 Earnings?

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On Thursday, Intel (NASDAQ:INTC) stock fell about 6% after-hours. The stock fell after the company posted its first-quarter earnings results. The semiconductor company withdrew its fiscal 2020 financial outlook and cautioned about the impact of the coronavirus pandemic. The company beat analysts’ consensus revenue and earnings estimate in the first quarter.

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Intel’s Q1 performance

In the first quarter, Intel reported an adjusted EPS of $1.45 compared to $0.89 in the first quarter the previous year. The earnings beat analysts’ consensus estimate by $0.17 per share. Also, the revenues of $19.83 billion beat analysts’ consensus estimate of $18.7 billion. The first-quarter revenues rose about 23.5% YoY (year-over-year). In the first quarter, the demand for Intel’s products was strong. More people started working remotely due to stay-at-home orders amid the COVID-19 pandemic.

In the first quarter, Intel’s CCG (Client Computing Group) revenues rose 13.8% YoY to $9.78 billion, which was higher than analysts’ consensus estimate of $9.34 billion. The company’s DCG (Data Center Group) revenues rose 42.7% YoY to $6.99 billion—more than analysts’ consensus estimate of $6.32 billion. The IoT (Internet of Things) revenues rose 1.6% YoY to $1.14 billion in the first quarter. In the first quarter, the PSG (Programmable Solutions Group) revenues rose 6.8% YoY to $519 million.

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Intel’s free cash flow rose 76.4% YoY to $2.89 billion in the first quarter. The company’s operating cash flow also rose by 24.2% YoY to $6.16 billion. Intel’s capital expenditures fell 1.6% YoY to $3.27 billion in the first quarter. The company returned $1.41 billion to shareholders in the form of dividends. On Thursday, Intel’s dividend yield was 2.24%.

Intel’s growth projection

Intel expects total revenues of $18.5 billion in the second quarter—a growth of 12% YoY. The company expects to increase its data-centric sales by 25% YoY. Intel also expects its adjusted EPS to rise by 4% YoY to $1.10. However, the company expects the operating margin to fall by 1% YoY to 30%.

Intel didn’t provide its fiscal 2020 financial guidance. According to a Reuters report, “It’s really hard to think about the second half in terms of how demand is going to look compared to what we ultimately thought when we first gave guidance,” Intel’s Chief Financial Officer George Davis said. The report also said, “The COVID-19 pandemic has ripped through the semiconductor industry, disrupting operations as lockdown orders hit countries in the chip supply chain such as Malaysia, where chip operations were eventually allowed to resume but suffered disruptions.”

Wall Street analysts expect Intel to post sales of $18.3 billion in the second quarter—a rise of 10.8% YoY compared to $16.5 billion in the second quarter of 2019. Also, analysts expect the company’s adjusted EPS to rise by 7.5% YoY to $1.14 in the second quarter.

Analysts expect Intel’s revenues to rise by 1.9% YoY in 2020 to $73.3 billion. The sales will likely rise by 1.2% YoY in 2021 to $74.2 billion. The adjusted earnings could fall by 0.6% YoY in 2020 to $4.84 per share. However, the profits will likely rise by 1.4% YoY to $4.91 per share in 2021.

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Analysts’ target price

Many analysts revised their target price for Intel stock after the first-quarter earnings results.

  • Cowen and Company decreased its target price from $64 to $60.
  • RBC decreased its target price from $56 to $52.
  • BMO decreased its target price from $65 to $55.
  • Mizuho decreased its target price from $71 to $67.
  • Wedbush decreased its target price from $52.50 to $51.
  • Suntrust Robinson increased its target price from $58 to $59.

Intel is covered by 44 Wall Street analysts. Among the analysts, 23 recommend a “hold,” 16 recommend a “buy,” and five recommend a “sell.” Wall Street analysts’ mean target price on the stock is $62.18, which implies a 5.3% gain from the current level of $59.04. The consensus target price for the stock has fallen from $63.85 in March—a fall of 2.6%.

Stock performance

Intel stock fell 1.8% on Thursday and closed at $59.04. The stock fell due to reports that Apple (NASDAQ:AAPL) plans to launch its own Mac chips next year. Intel stock was trading 14.8% below its 52-week high of $69.29. Meanwhile, the stock was trading 37.8% above its 52-week low of $42.86. At Thursday’s closing price, Intel had a market cap of $252.7 billion.

Based on Thursday’s closing price, Intel stock was trading 3.1% above its 20-day moving average of $57.24. The stock is also trading 4.2% above its 50-day moving average of $56.64 and 0.6% above its 100-day moving average of $58.68. The company’s 14-day RSI (relative strength index) score is 54. The score indicates that the stock isn’t overbought or oversold.

On Thursday, the S&P 500 Index has fallen by 0.05%. Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NYSE:AMD) lost 0.8% and 0.04%, respectively, on the same day. Other semiconductor stocks including Qualcomm (NASDAQ:QCOM) and Micron Technology have returned -1.2% and -0.3%, respectively.

AMD will release the results for its March ended quarter on April 28. Analysts expect the company’s first-quarter reported revenue to rise by 40.2% to $1.8 billion. They expect the company to post an adjusted EPS of $0.18 versus $0.06 in the first quarter of 2019.

Read Could Intel’s Q1 Earnings Report Boost Its Stock? to learn more.

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