Intel is feeling the pain in the stock market, with a dramatic 12% tumble in today’s trading session following the release of their favorable Q4 results after market hours on Thursday. However, the chip giant provided underwhelming guidance for the first quarter, which sent investor sentiment plunging.
But despite the recent dip, it’s important to note that investor sentiment has been high for chip stocks amid easing inflation. The Zacks Semiconductor-General Industry is already up 18% year to date and a staggering 121% over the last year, with Nvidia and AMD leading the way.
Although Intel’s stock is down 13% year to date, it’s crucial to recognize that INTC shares have climbed an impressive 55% in the last year. This begs the question: is the recent dip a buying opportunity?
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Q4 Review
CEO Pat Gelsinger has stated that the fourth quarter capped off a year of tremendous progress on Intel’s transformation, with Q4 EPS of $0.54 a share topping the Zacks Consensus of $0.44 a share by 23%. Furthermore, Q4 earnings soared 440% from $0.10 a share in the prior year quarter. This marks Intel’s fourth straight quarter of surpassing earnings estimates.
On the top line, Q4 sales of $15.4 billion came in 2% better than expected and rose 10% year over year. Intel attributed these exhilarating results to consistent execution and accelerated innovation, which resulted in strong customer momentum for the company’s products.
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Following a very sharp recovery in 2022, Intel’s full-year fiscal 2023 revenue of $54.2 billion dipped 14% year over year, with annual earnings of $1.05 per share falling 43% from $1.84 a share.
In a bid to compete with Nvidia and AMD in the AI-powered chips market, Intel is continuing to build its external foundry business and at-scale global manufacturing by executing its mission to bring AI everywhere. Intel expects this to drive long-term value to shareholders, with the company previously announcing an organizational change to integrate its Accelerated Computing Systems and Graphics Group into its Client Computing Group and Data Center and AI Group. Notably, Data Center and AI revenue dipped 10% during Q4 to $4 billion, but Client Computing revenue jumped 33% to $8.8 billion.
Image Source: Intel Press Release
Mobileye Headwinds and Weaker Outlook
Discrete headwinds in Intel’s Mobileye segment, the company’s autonomous driving technologies unit, along with business exits among others, are impacting overall revenue for the first quarter. This led to Intel offering first-quarter revenue guidance of $12.2 billion-$13.2 billion, which was below most analysts’ expectations and the current Zacks Consensus of $14.3 billion.
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Bottom Line
It may be too soon to buy the dip in Intel’s stock as earnings estimates are likely to decline given the company’s weaker-than-expected guidance. For now, Intel’s stock lands a Zacks Rank #3 (Hold) and may continue to reward longer-term investors, but the company’s transformation and outlook should still be closely monitored going forward.
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