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Intel seen struggling to ‘find its footing’ as guidance miss sends stock tanking

Intel Corp.’s stock hasn’t seen a double-digit percentage decline in more than two years. But it might break that streak after a downbeat earnings forecast.

The company late Thursday issued an outlook for first-quarter adjusted earnings per share of 13 cents on revenue of $12.2 billion to $13.2 billion. Both forecasts came up well shy of the FactSet consensus: Analysts had been modeling 34 cents in adjusted EPS along with revenue of $14.3 billion.

“While we expect a slightly sub-seasonal first quarter from our core product businesses, we see material inventory corrections in Mobileye and PSG,” Intel INTC, +0.94% Chief Financial Officer David Zinsner said on the earnings call, referring to the Programmable Solutions Group.

Furthermore, the company anticipates “a significant drop in [Intel Foundry Services] revenue after seeing accelerated purchasing in our traditional packaging business and cyclical weakness in wafer equipment-buying in the first half of the year,” he continued.

Intel’s stock fell 10.9% in after-hours action Thursday. If such a decline carried through to Friday’s close, it would mark the stock’s worst single-day percentage decline since Oct. 22, 2021, when it fell 11.7%, according to Dow Jones Market Data. After that, the worst drop was an 8.6% plunge seen July 29, 2022.

“We think Intel shares are justifiably selling off following soft [first-quarter] guidance that leaves us to question when the company will find its footing as competitors capitalize on an ongoing AI server [capital-expenditure] cycle,” Wells Fargo analyst Aaron Rakers wrote in a note to clients.

Also read: Opinion: Intel’s stock plunge shows that Wall Street still hasn’t learned its lesson on AI hype

The guidance miss comes as Intel’s stock has enjoyed a nice recent rally, surging about 50% since the company last posted results three months ago. The recent run in the share price “raised the bar on expectations,” an HSBC analyst wrote earlier this week.

Intel’s whiff on the outlook overshadowed better-than-expected results for the latest quarter, in which the company generated net income of $2.7 billion, or 63 cents a share, versus a loss of about $700 million, or 16 cents a share, in the year-prior period. On an adjusted basis, Intel earned 54 cents a share, while analysts were modeling 45 cents a share.

“We expect to unlock further efficiencies in 2024 and beyond as we implement our new internal foundry model, which is designed to drive greater transparency and accountability and higher returns on our owners’ capital,” Zinsner said in a release.

Revenue climbed to $15.4 billion from $14.0 billion, whereas the FactSet consensus called for $15.2 billion.

Read: Missed the boat on AMD’s stock surge? Why this analyst says you’re not too late.

Intel saw a 33% boost in revenue, to $8.8 billion, from its client-computing group, which is the company’s largest unit and the one that encompasses PCs. Analysts had been modeling $8.5 billion.

Revenue from the data-center and artificial-intelligence group was down 10% to $4.0 billion, while analysts were looking for $4.1 billion.

The company’s network and edge business saw a 24% drop in revenue, to $1.5 billion, relative to a year before. That total matched the FactSet consensus.

Meanwhile, Mobileye revenue increased 13% to $637 million, and foundry services revenue jumped 63% to $291 million.

Don’t miss: Nvidia is no longer Morgan Stanley’s top chip pick. A much different name is.

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