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Intel CEO Bob Swan at CES in January, 2020

Is Intel Stock a ‘Buy’ or ‘Sell’ After Its Q2 Earnings?

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Intel stock was trending down in the pre-market trading session on July 24. The stock fell 11.6 percent as of 6:03 a.m. ET. The company posted its second-quarter earnings results on July 23 after the market bell. The stock fell by about 8 percent in extended trading on the same day. Intel stock fell after the company announced its disappointing third-quarter outlook. Notably, Intel’s adjusted earnings and sales beat the second-quarter estimates.

Intel’s Q2 earnings

In the second quarter, Intel reported an adjusted EPS of $1.23 compared to $1.06 in the same quarter last year. Intel’s earnings beat analysts’ consensus estimate of $1.11 per share. Also, the revenues of $19.73 billion beat analysts’ consensus estimate of $18.55 billion. The second-quarter revenues rose about 19.5 percent YoY (year-over-year). People purchased Intel’s products so that they could effectively work from home amid the coronavirus.

In the second quarter, Intel’s Client Computing Group sales rose 7.4 percent YoY to $9.50 billion—more than the analysts’ estimate of $9.1 billion. The company’s Data Center Group sales rose 42.8 percent YoY to $7.12 billion—more than the analysts’ estimate of $6.61 billion. The Internet of Things sales fell 31.3 percent YoY to $816 million in the second quarter. Meanwhile, the Programmable Solutions Group sales rose 2.5 percent YoY to $501 million in the second quarter.

Intel’s free cash flow rose 92.1 percent YoY to $7.75 billion in the second quarter. The company’s operating cash flow also rose 47.1 percent YoY to $11.2 billion. Intel’s capital expenditures fell 4.1 percent YoY to $3.41 billion in the second quarter. The company returned $1.40 billion to shareholders in the form of cash dividends in the second quarter. On Thursday, the company’s dividend yield was 2.19 percent.

Intel’s growth projection

Intel expects total revenues of $18.2 billion in the third quarter—a reduction of 5.16% YoY. The company also expects its adjusted EPS to fall by 28.2 percent YoY to $1.02. For fiscal 2020, Intel expects to report an adjusted EPS of $4.53 on sales of $75.00 billion. The semiconductor company also announced that it will postpone the launch of its 7-nanometer chips.

In Intel’s second-quarter conference call, CEO Bob Swan said, “We are seeing an approximate six-month shift in our 7-nanometer-based CPU product timing relative to prior expectations.” Swan also said, “We’ve root-caused the issue and believe there are no fundamental roadblocks, but we have also invested in contingency plans to hedge against further schedule uncertainty.” Notably, Advanced Micro Devices has already started to sell its 7-nm based CPU.

Wall Street analysts expect Intel to post total revenues of $18.13 billion in the third quarter—a decline of 5.5 percent YoY compared to $19.2 billion in the third quarter of 2019. Also, analysts expect the company’s adjusted EPS to fall 20.4 percent YoY to $1.13 in the third quarter.

According to analysts, Intel’s revenues could rise 3.8 percent YoY in 2020 to $74.7 billion. The sales will likely fall 0.9 percent YoY in 2021 to $74.0 billion. The adjusted earnings will likely fall 0.8 percent YoY in 2020 to $4.83 per share. Intel’s profits could fall 0.2 percent YoY to $4.82 per share in 2021.

Analysts’ recommendations and target price:

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

  • Credit Suisse decreased its target price from $75 to $70.
  • Cowen and Company decreased its target price from $60 to $55.
  • RBC decreased its target price from $52 to $48.
  • Evercore ISI decreased its target price from $66 to $55.
  • JP Morgan decreased its target price from $80 to $75.
  • UBS decreased its target price from $70 to $64.
  • Wells Fargo decreased its target price from $60 to $55.
  • Roth Capital downgraded the stock from “buy” to “neutral” and decreased its target price from $75 to $55.
  • Barclays downgraded the stock from “equal weight” to “underweight” and decreased its target price from $58 to $48.
  • Citigroup decreased its target price from $58 to $53.
  • Mizuho decreased its target price from $67 to $63.
  • BMO decreased its target price from $55 to $50.
  • Deutsche Bank downgraded the stock from “buy” to “hold” and decreased its target price from $70 to $60.
  • Susquehanna decreased its target price from $58 to $53.
  • Suntrust Robinson increased its target price from $59 to $61.
  • BOFA Global Research downgraded the stock from “buy” to “neutral” and decreased its target price from $70 to $62.
  • Northland Capital Markets downgraded the stock from “market perform” to “underperform” and decreased its target price from $60 to $48.
  • Bernstein downgraded the stock from “market perform” to “underperform” with a target price of $45.

Intel is covered by 44 Wall Street analysts. Among the analysts, 25 recommend a “hold,” 12 recommend a “buy,” and seven recommend a “sell.” Wall Street analysts’ mean target price on the stock is $58.87, which implies a 2.5 percent loss from the current level of $60.40. The stock’s consensus target price has fallen from $63.52 in June—a fall of 7.3 percent.

Intel’s stock performance

Currently, Intel stock is trading 12.8 percent below its 52-week high of $69.29. The stock is trading 38.4 percent above its 52-week low of $43.63. At the closing price on July 23, Intel had a market cap of $255.7 billion.

Based on the last closing price, Intel stock was trading 1.9 percent above its 20-day moving average of $59.27. The stock is also trading 0.05 percent below its 50-day moving average of $60.43 and 4.0 percent above its 100-day moving average of $58.07. Intel’s 14-day relative strength index score is 53. The score suggests that the stock isn’t overbought or oversold.

On July 23, the S&P 500 Index fell by 1.2 percent. Nvidia and AMD lost 3.0 percent and 3.6 percent, respectively, on the same day. Micron Technology and Qualcomm returned 1.9 percent and -3.2 percent, respectively.

AMD will likely release the results for its June ended quarter on July 28. Wall Street analysts expect AMD’s second-quarter reported revenue to rise 21.6 percent YoY to $1.86 billion. They expect the company to report a non-GAAP EPS of $0.16 compared to $0.08 in the second quarter of 2019.

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