On Friday, HSBC (LON:HSBA) cut its rating on Intel Corporation (NASDAQ:INTC) stock from Hold to Reduce, significantly lowering the price target to $19.80 from the previous $35.00.
This adjustment follows Intel's second-quarter 2024 earnings report, which revealed revenues and gross margins that fell short of expectations.
Intel announced a second-quarter revenue of $12.8 billion, which was slightly below HSBC's estimate of $13 billion and just shy of the consensus estimate of $12.9 billion.
A notable point of concern for HSBC was Intel's gross margin (GM) of 38.7%, which was significantly lower than both HSBC's and the consensus estimates of 43.5%.
The company's management attributed the gross margin shortfall to several factors, primarily the increased wafer costs associated with transitioning 3nm/4nm production to its Ireland fabrication plant. This shift has not only impacted the second quarter but is also expected to affect the third quarter of 2024.
Intel's guidance for the third-quarter gross margin stands at 38%, a figure that falls well below HSBC's estimated 44.3% and the broader consensus of 45.5%.
Additionally, Intel's guidance for third-quarter 2024 revenue is set at $13 billion, which is notably less than HSBC's forecast of $14.5 billion and the consensus estimate of $14.3 billion. This guidance indicates that Intel may continue to face financial headwinds in the coming quarter.
The revision in Intel's stock rating and price target by HSBC reflects the analyst's response to the company's latest financial performance and near-term expectations. This move by HSBC indicates a more cautious view of Intel's stock for potential investors.
In other recent news, Intel Corporation has made several significant announcements following its second-quarter earnings report. The tech giant reported second-quarter revenues of $12.8 billion, falling slightly short of estimates.
This led HSBC to downgrade the company's stock from Hold to Reduce and lower the price target to $19.80. Similarly, Raymond James adjusted its rating on Intel from Outperform to Market Perform, expressing concerns over the company's third-quarter outlook and ongoing margin challenges.
Intel has also announced a workforce reduction of 15% and plans to suspend its quarterly dividend starting in the fourth quarter. These strategic shifts are focused on improving the company's underperforming manufacturing operations.
Intel's third-quarter revenue is projected to fall between $12.5 billion and $13.5 billion, reflecting the competitive challenges it faces in the semiconductor industry.
In the midst of these financial adjustments, Intel has revealed the development of an optical compute interconnect (OCI) chiplet aimed at enhancing data processing speeds within AI infrastructure. This aligns with the company's ambition to reach $1 billion in cumulative software revenue by 2027.
Moreover, Intel's subsidiary, Mobileye, is expanding its partnership with Zeekr to accelerate the localization of Mobileye's technologies in China and integrate them into future Zeekr models for the global market. These are recent developments concerning Intel Corporation.
InvestingPro Insights
Intel Corporation's (NASDAQ:INTC) recent financial performance, as highlighted in the article, aligns with several data points and trends observed in real-time metrics from InvestingPro. The company's market capitalization stands at $123.66 billion, and despite the revenue shortfall reported in the second quarter of 2024, Intel's revenue over the last twelve months was $55.24 billion. However, it's worth noting a slight revenue decline of 2.09% during this period.
InvestingPro Tips suggest that Intel is trading at a low P/E ratio relative to near-term earnings growth, with a current P/E Ratio of 30.21 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 at 29.48. This could indicate that the stock is undervalued in terms of its earnings potential. Furthermore, Intel is recognized as a prominent player in the Semiconductors & Semiconductor Equipment industry and has a history of consistent dividend payments for 33 consecutive years, demonstrating a commitment to returning value to shareholders.
Despite recent challenges, Intel's stock is trading near its 52-week low, which may present a potential opportunity for investors who believe in the company's long-term fundamentals. Moreover, the InvestingPro platform lists additional tips for Intel, providing more in-depth analysis for users interested in the semiconductor giant's outlook.
For those considering an investment in Intel, it's essential to keep an eye on the company's performance metrics and industry position. The InvestingPro platform offers a comprehensive set of additional tips, with 7 more available for Intel, to help investors make more informed decisions.
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