Intel’s Q2 Earnings Preview: Rosenblatt Analyst Predicts Stable PC Market and Challenges from AMD
Intel Corp INTC is expected to report flat to up sales growth for the second quarter of fiscal 2024, according to Rosenblatt analyst Hans Mosesmann. While he expects the company to deliver inline earnings, Mosesmann maintains a Sell rating on Intel and a price target of $17. His outlook highlights the challenging environment for Intel as it faces competition from Advanced Micro Devices, Inc AMD in the server market.
Key Takeaways:
- Stable PC Market: Rosenblatt forecasts a stabilizing PC market, suggesting a potential bottoming in the Altera, Mobileye, and NEX segments.
- Modest Growth Guidance: Intel’s management is expected to issue a modest growth guidance for the third quarter, potentially below Mosesmann’s mid-to-high single-digit expectation.
- AMD’s Growing Share: Mosesmann anticipates weaker server Sierra Forrest and Granite Rapids ramps as AMD continues to gain share with its EPYC4 and newer EPYC5 roadmaps.
- Price Target Below Consensus: Rosenblatt’s price target of $17 is significantly lower than the consensus $36.07, highlighting the analyst’s bearish outlook on Intel.
A Closer Look at Intel’s Q2 and Q3 Projections
Rosenblatt’s Q2 Estimates:
- Revenue: $13 billion (aligning with consensus)
- Adjusted Gross Margin: 43.5% (aligning with guidance and consensus)
- Adjusted EPS: $0.10 (aligning with guidance and consensus)
Rosenblatt’s Q3 Estimates:
- Revenue: $14 billion (below consensus of $14.4 billion)
- Adjusted Gross Margin: 44.8% (below consensus of 46.2%)
- Adjusted EPS: $0.14 (below consensus of $0.32)
AMD’s Influence on Intel’s Future
The analyst highlights AMD’s continued success in the server market as a significant headwind for Intel. AMD’s EPYC4 and newer EPYC5 roadmaps are driving market share gains as Intel struggles to keep pace with its server chip offerings.
AMD’s aggressive investments in research and development have resulted in several significant advantages, including:
- Faster Processing Speeds: AMD’s EPYC processors offer higher core counts and clock speeds than Intel’s Xeon processors, leading to improved performance in demanding workloads like data analytics and scientific computing.
- Advanced Features: AMD’s EPYC processors incorporate advanced features like PCIe 5.0 support and integrated security capabilities, further bolstering their appeal for data centers and high-performance computing.
- Competitive Pricing: AMD’s pricing strategy has made its products more attractive to budget-conscious customers while offering comparable performance to Intel’s offerings.
Intel’s Ongoing Challenges
Beyond AMD’s competition, Intel faces several other challenges:
- Manufacturing Delays: Intel has faced production delays and yield issues with its advanced manufacturing processes, impacting its ability to meet growing demand.
- Increased Competition: The semiconductor market is becoming increasingly competitive, with players like Qualcomm and ARM making inroads into Intel’s core markets.
- Changing Market Dynamics: The rapid evolution of cloud computing and edge computing has led to a shift in demand for processor architectures, challenging Intel’s traditional dominance.
What’s Next for Intel?
Intel has announced plans to invest heavily in research and development to address its challenges and regain its technological leadership.
These key initiatives include:
- Advanced Manufacturing: Intel is investing billions of dollars in building new fabrication facilities and upgrading its existing manufacturing infrastructure to improve its chip production capabilities.
- New Architectures: Intel is developing new processor architectures and technologies to address the rapidly evolving computing landscape, including artificial intelligence and machine learning.
- Partnerships and Acquisitions: Intel is forging new partnerships and pursuing acquisitions to expand its product portfolio and address emerging market opportunities.
Investor Outlook
Investors are closely watching Intel’s progress in executing its turnaround strategy. The company’s ability to regain market share and address its manufacturing challenges will be crucial to its future success.
Investors can gain exposure to Intel stock through:
- Vanguard Value ETF VTV
- Vanguard Information Tech ETF VGT
Intel’s stock price has fallen more than 13% in the past 12 months, and the market remains uncertain about its future. While the company has announced its plans for recovery, the execution and effectiveness of these strategies will be key to determining Intel’s future performance.
