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​​Intel stock price slumps to eight-year low after earnings​

Intel’s earnings last night saw the stock dive to its lowest level since 2016. Are more losses likely?

Trading Source: Adobe images

​​​Stock market reacts to disappointing outlook

Intel shares plunged over 20% in pre-market trading on Thursday, following the company's announcement of drastic cost-cutting measures and disappointing earnings forecast. The steep decline reflects growing concerns about the chipmaker's ability to navigate challenges in the semiconductor industry and execute its turnaround plan.

​Earnings fall short of expectations

​For the second quarter (Q2), Intel reported revenue of $12.8 billion, a 1% decrease year-over-year and below Wall Street's expectations of $12.9 billion. The company's pro forma earnings came in at 2 cents per share, down from 13 cents the previous year and significantly lower than the 10 cents analysts had anticipated.

​Weak forecast raises eyebrows

​Intel's outlook for the third quarter (Q3) further dampened investor sentiment. The company projected revenue between $12.5 billion and $13.5 billion, with a potential pro forma loss of 3 cents per share. This forecast falls short of Wall Street's expectations of a 13 cent per share profit on revenue of approximately $14.4 billion.

​Drastic cost-cutting measures unveiled

​In response to these challenges, Intel announced significant cost-saving initiatives. The company plans to reduce its workforce by 15%, equivalent to about 15,000 jobs, with most cuts expected to occur this year. Additionally, Intel is scrapping its dividend and reducing capital spending by 20% compared to previous forecasts.

​Challenges in key business segments

​Intel's data centre division, a crucial part of its business, experienced a 3% sales decline in the latest quarter. Chief executive officer (CEO) Pat Gelsinger attributed this partly to customers shifting their spending towards AI chips produced by competitors like NVIDIA. The company also faced production issues with its Meteor Lake processors, contributing to the weaker-than-expected performance.

​Long-term strategy remains intact

​Despite the current setbacks, Gelsinger maintains that Intel's long-term competitive position remains unchanged. The company expects to see significant benefits from its recent investments in manufacturing and process technology by 2026. Intel also reaffirmed its commitment to regaining global leadership in chipmaking technology by next year.

​Government support amidst challenges

​The weak forecast comes in the wake of Intel receiving a promise of $8.5 billion in direct funding from Washington to bolster its position in the semiconductor industry. This support underscores the national priority of rebuilding the US advanced chip manufacturing base, even as Intel grapples with near-term challenges.

​Intel stock price – broker rating

​Intel has an ‘underperform’ rating on the IG platform using data compiled by TipRanks:

​Intel score

​Intel score ​Source: TipRanks/IG
​Intel score ​Source: TipRanks/IG

​Meanwhile, of the 19 analysts with ratings on the stock, three have ‘buy’ ratings, with 14 ‘hold’ rankings and 2 ‘sells’.

​Intel broker ratings

​Intel broker ratings chart ​Source: TipRanks/IG
​Intel broker ratings chart ​Source: TipRanks/IG

​Intel stock price – technical analysis

​Intel’s shares are now at their lowest level since February 2016. If the February 2016 low at $21.92 is broken, then the price’s next target would be the 2012 high at $20.45. While it trades at 30 times earnings, there is little sign of a more positive outlook emerging, while price action remains resolutely bearish.

​INTC chart

INTC chart Source: ProRealTime
INTC chart Source: ProRealTime
Chris Beauchamp

Chris Beauchamp

Chief Market Analyst

London

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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