/Chip%20During%20Rush%20Hour.jpg)
After climbing to an 8-month high earlier this month, shares of Intel (INTC) have steadily declined, dropping -13% from that high as earnings results from peers Samsung Electronics and Micron Technology (MU) signaled that consumer demand remains weak. The markets will look to Intel’s quarterly earnings results after the close today to confirm if the worst is over.
Weakness in consumer demand and high chip inventories knocked Intel down to a 6-month low in February. Still, the stock recovered to an 8-month high earlier this month on optimism that consumer demand would pick up later this year. According to the International Data Corporation, global personal computer (PC) shipments in Q1 slumped -29% y/y to 56.9 million, taking them to the levels of 2019 before the pandemic.
Some analysts are concerned that there has been little uptick in demand from consumers or corporations for laptops or desktop machines. Stifel Nicolaus & Co said, “Recent data points indicate continued weakness in the PC market and that while channel inventory drawdowns continue, demand appears sluggish.” Also, Rosenblatt Securities said data on chip inventory and the uptake of new Intel products is “murky,” and indications are that things are trending in a negative direction.
The consensus is for Intel to report a -$2.7 billion loss in Q1 and a revenue contraction of 39% when it reports earnings after today’s close. Despite the likely dismal results, investors are looking forward to an anticipated rebound in the second half of this year, with projections calling for a resumption of sales growth in Q4. However, any deterioration in that view from today’s results would likely put pressure on the stock.
Recent results from Intel’s peers paint a bleak picture of a near-term rebound in demand. Samsung Electronics, which surpassed Intel as the world’s biggest chipmaker, said operating income in Q1 dropped more than -95% to less than half of what analysts had projected when it reported on April 6. Also, Micron Technology followed with an equally dire report. However, Sanford C. Bernstein said that Intel is shipping fewer chips than its PC-maker customers have been using by a “wide margin,” meaning there’s hope that it can begin to meet lowered expectations in the second half of the year.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
