Intel’s report is above Wall Street estimates. Why are stocks falling?
Intel (INTC) shares fell, even though the chip manufacturer’s report on the results of 2021 exceeded market analysts’ forecasts. Intel announced the start of new server chip sales in the current quarter and investment plans in new factories. However, analysts point to disappointing profit forecasts.
With a market capitalization of $209.7 billion, technology giant Intel, on Wednesday, January 26, after the close of trading, summed up the financial results of the 4th quarter and the whole of 2021. However, Intel shares have been highly volatile for four years and have hardly changed since the beginning of 2022, falling by 3% after the close of trading on Wednesday.
Intel’s earnings per share for the 4th quarter decreased by 28% (compared to last year’s value) to $1.09, but this was better than the analytical forecasts of a decrease to $0.91 of earnings per share.
Total revenues decreased by 3% to $19.5 billion and exceeded market estimates of $18.31 billion—quarterly revenue and profit statistics on the Intel Reports page. The company said shipments of its new next-generation Sapphire Rapids server chip would begin this quarter and their mass production in the second quarter.
Last week, Intel announced that it plans to build a chip manufacturing complex in Ohio, in which it will invest at least $20 billion. The scheduled launch date of the plant is 2025. The new CEO of Intel sees in the implementation of these plans an opportunity to catch up with competitors, regain lost market share and restore the technological superiority of the company for better competition with both American and Asian semiconductor giants.
Intel’s gross profit in the reporting quarter decreased to 55.4%, which analysts saw as a cause for concern, even if market estimates predicted an even more significant reduction (to 53.6%). Most on Wall Street believe that Intel’s long-term capital spending on building new factories and new technologies will pressure its profits.
While investors want Intel to return to the historical level of annual gross profit above 60%, the company’s CFO, David Zinsner, gave a forecast in the range of 51% – 53%. Intel CEO Pat Gelsinger said he expects margins to recover at the end of the five years in the longer term.
Intel said it expects revenue in the first quarter of 2022 of $18.3 billion, which beat analysts’ forecast of $17.62 billion. However, the profit forecast was disappointing: $0.80 per share, while the average Wall Street estimates were $0.86.
At the same time, Intel’s current loss of some market share of server chips in favor of competitors, as well as the development of Amazon and Microsoft (the largest buyers of server chips) own chips, suggest that the profit of this segment of the company may fall in the long term.
In addition, the year 2022 may prove difficult for Intel due to the ongoing shortage in the supply chains of chips, which affects the company both directly and the industry as a whole.
Forecasts for the PC market are also ambiguous. Some analysts believe that as the COVID-19 pandemic “subsides,” the overall PC market will return to its previous level, and sales of Intel chips may decrease. Nevertheless, a joyous moment for Intel remains the planned IPO of its subsidiary Mobileye, a developer of technologies for self-driving cars, in mid-2022.In addition, Intel announced a 5% increase in quarterly dividends to $0.365 per share.
