Can Intel’s Strong Earnings Offset Supply Constraints?

Even with strong earnings results, a company’s shares may still slide. Intel Corporation (INTC) released earnings Thursday evening, and although it had beaten consensus estimates on sales, investors were shaken by the admission of a surprisingly prolonged semiconductor chip shortage. The stock opened about 5% lower on Friday, and has been trying to work its way back up since. (See Intel stock charts on TipRanks)  

Reporting on the development is Hans Mosesmann of Rosenblatt Securities, who wrote that the company announced strong guidance for the remainder of FY21 and an outlook that includes high demand levels. These positives were not enough to appease investors, and the supply side challenges prevailed as a sell signal. Intel indicated that the supply/demand relationship would not equalize until about 2023.  

Mosesmann reiterated a Sell rating on the stock, and declared a price target of $40. This target suggests a potential 12-month downside of about 24.5%, as of 10:30am EST Monday.  

The five-star analyst explained that the company has several new CPUs (central processing units) in its pipeline, such as the Alder Lake and Sapphire Rapids projects. Unfortunately, Sapphire Rapids has been delayed to at least the first half of FY22, and the Aurora Supercomputer project has faced rescheduling several times over the last six years. At this point, Mosesmann can not speculate on when it may be ready for commercialization.  

Intel’s upside rests on the increasing amount of household computing devices, as well as the increasingly shrinking rate at which they are replaced. Mosesmann added that Intel expects sales to increase 1% year-over-year by the end of FY21. However, gains made on the total addressable market will be hampered by the chip shortage.  

On TipRanks, INTC has an analyst rating consensus of Hold, based on 9 Buy, 11 Hold, and 8 Sell ratings. The average Intel Corp. price target is $59.96, reflecting a possible 12-month upside of about 11%.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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