Intel Q2 Earnings: A Turning Point for the Beleaguered Chipmaker?
Intel Q2 Earnings: A Turning Point for the Beleaguered Chipmaker?
A new CEO is trying to help the company close the gap with its semiconductor peers
- Intel is scheduled to report earnings tomorrow.
- Traders expect earnings per share of $0.01 on $11.96 billion in revenue.
- Guidance from the new CEO on 14A technology could be the key to its share price reaction.
Intel (INTC) is scheduled to report second quarter earnings after tomorrow’s market close.
The company has struggled in recent years as rivals like Nvidia (NVDA) and Advanced Micro Devices (AMD) have catapulted ahead by taking advantage of the rush toward artificial intelligence investment.
Lip Bu-Tan, Intel’s new chief executive officer, aims to reverse strategic mistakes made in recent years by focusing the company on its next-generation chipmaking process, known as 14A.
Tan’s predecessor spent billions on 18A technology, which is less efficient than the newer versions. The shift is expected to lead to a write-down, which could amount to a large expense for the company. However, it will help it in its competition, particularly against Taiwan Semiconductor Manufacturing (TSM).
That said, Tan’s commentary on plans for 14A could be vital to the stock’s post-earnings reaction. It’s especially important because sales are expected to decline after the company’s first unprofitable year in nearly 40 years.
What do traders expect?
Analysts anticipate Intel will report earnings per share (EPS) of $0.01 on $11.97 billion in revenue. Last year, the company reported EPS of $0.02 on $12.83 billion in revenue.
Intel has missed on EPS expectations in two of the last four quarters while it has beaten on revenue expectations in three of the last four quarters. Analysts are largely neutral on the stock, with two strong “buy” ratings, 38 “hold” ratings, one “sell” rating and four “strong sell” ratings.
The average one-year price target is at 21.90, representing a 6.9% decline from today’s 23.52 stock price.
Trading Intel earnings
Intel traded with an implied volatility rank (IVR) of 28.4, meaning that volatility is subdued compared to the past 12 months of trading.
The options market shows an expected move of +/- 1.67 points, or 7.1% of the stock price. That’s in the middle of the average 5% to 10% post-earnings move for S&P 500 companies.
Intel is up 33% from its April low, which trails the 67% gain in the VanEck Semiconductor exchange-traded fund (SMH) over the same period. Chips stocks have performed well amid a broader rally in technology stocks. However, the underperformance highlights Intel’s struggles against the broader semiconductor sector.
The underperformance may help insulate Intel from a deeper pullback if the numbers disappoint, given how it has underperformed against its peers. Alternatively, Intel will likely have to impress against expectations to help it catch up.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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