Was Intel's (INTC) Second Quarter a Speedbump or Inflection?

July 23, 2021 7:41 AM EDT
Get Alerts INTC Hot Sheet
Price: $54.26 -1.04%

Rating Summary:
    28 Buy, 20 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 15 | New: 24
Trade Now! 
Join SI Premium – FREE

Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.

Intel's (NASDAQ: INTC) second quarter results beat expectations but weaker than expected guidance prompted a number of price target cuts from supporters as well as detractors leaving a wide dispersion of price targets. Component constraints are holding back revenue in 3Q in the PC business, while the data center is recovering slowly (but as expected) after a weaker 1H. Additionally, 2H gross margins are expected to fall to 55% as startup expenses for 7 nm kick in, and the costs of ramping the first 10 nm desktop product drive up cost of sales from what was a relatively low level in 2q.

Morgan Stanley analyst, Joseph Moore, sees the data center business recovering in the second half as supply constraints are resolved and views the guidance as conservative. The price target drops slightly to $70 from $72 but sees this period as a brief slowdown. He stated "even with multiple headwinds in the business, we view 2h numbers as conservative. We don't see many catalysts, and we don't fully buy into the foundry strategy as it stands today, but we do believe that the company can put a turnaround into place without earnings falling below the $4.50 level, and we remain OW."

BofA analyst, Vivek Arya, on the other hand cut the price target to $52 seeing additional risk in gross margins as the company faces ARM based competition from AMD and NVDA and possible yield issues in 10nm and 7nm. Not to mention the tough compares in 2H22 into 2023. He takes a more conservative stance, stating "Overall, we tweak up CY21E to $4.80 (partly on a lower tax rate), but tweak down CY22E by 7c/1% to $4.59 and CY23E by 18c/4% to $4.89, implying no EPS growth for the next few years. Our $52 PO is based on 11x (vs 13x prior) CY22 PE, lower given limited EPS growth, and implies 21x EV/FCF, inline with large cap semi peers. We maintain Buy on main competitors Advanced Micro (AMD), Nvidia (NVDA), and Marvell (MRVL)."



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Analyst Comments, Analyst EPS View, Earnings

Related Entities

Morgan Stanley, Earnings