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After it released its fiscal 2022 second quarter earnings report earlier this week, chip maker Intel Corporation is the subject of hard-hitting analyst coverage from a number of Wall Street firms. Intel’s latest earnings saw the company’s revenue and net income fall 22% and 109% annually, respectively, with management attributing the low revenue to the current economic downturn and the net loss to high capital spending as it looks to regain leadership in chip manufacturing process technology. and establish themselves on solid footing in the contract chip industry.
After the earnings, Wall Street analysts almost unanimously downgraded Intel̵[ads1]7;s stock price target and issued notes with a range of criticisms. One of these came from Northland, which expressed surprise at Intel’s apparent unpreparedness for the disappointing earnings report
Intel should have pre-announced results for the second quarter, says Northland analyst
At least seven Wall Street analysts covering the semiconductor industry downgraded Intel’s stock price the day after its Q2 2022 earnings report was released. The lowest of these came from Rosenblatt, who cut his price target by $10 to $30, called earnings an “unmitigated disaster” and also questioned why the results were not announced in advance. The analyst also warned that Intel’s data center market will suffer in the coming years.
The second-lowest price target came from research firm Susquehanna, which cut it to $33 from $40 and said that despite a desire to believe the earnings report was a one-off, there are persistent problems with Intel’s business model that merit years of caution. coming. These include the growing popularity of Arm-based data center processors, AMD’s rapid growth in the PC space, and heavy capital spending that will continue to weigh on net income amid the risk of the recession contracting the PC market.
Northland analyst Gus Richard has the highest price target for the company in our sample today, cutting it from a previous $62 to a more modest $55. But in his comments, Richard took the company to task when he stated that the earnings report was inexcusable. The analyst went on to add that the inexcusable earnings report calls into question the company’s ability to manage its investor relations and shows that perhaps Intel lacks the ability to predict results in advance since it had failed to pre-announce earnings.
However, Richard maintained a moderate tone of optimism for the company, stating that he expects Q2 and Q3 to be the worst for Intel and that the results are not surprising given the historic turnaround that the company is attempting.
Joining the chorus was Jefferies, who laid out a basic case that Intel was losing market share to both NVIDIA and AMD in the PC, server and data center markets. On the merits, the research firm noted that a fabulous model, process technology execution and a potential AMD misexecution could breathe new life into the company. In the long term, Jefferies outlined that the growing shift to Arm is a significant threat to Intel, and that in their view, the best long-term strategy for Intel would be to switch to a fabless model through a joint venture with Taiwan Semiconductor Manufacturing Company (TSMC). In such a scenario, Intel would be best suited to share capital expenditures with the US government and TSMC, as well as provide joint foundry services.