Suffice it to say, microprocessor manufacturer Intel (NASDAQ:INTC) stock has disappointed its investors for the majority of 2022.
However, financial traders went into a feeding frenzy with INTC stock after the company reported its quarterly earnings. They apparently ignored a number of issues that Intel is still facing. Furthermore, one analyst reaffirmed a $20 price target on Intel shares even after the post-earnings rally.
Ask yourself: Was Intel a materially different company on Oct. 27, compared to Oct. 26? Of course, the answer is no. Yet, all of a sudden, traders reacted to Intel’s third-quarter 2022 financial results as if a miracle had taken place.
There actually was no miracle, and it’s the same company with the same problems as before. Indeed, there are notable points in the data indicating an imminent downtrend resumption for Intel’s unfortunate stakeholders.
The Extreme Move in INTC Stock
You can call it a knee-jerk reaction, or maybe just a brief relief rally because the sky hadn’t fallen that day. However you describe the post-earnings most in INTC stock, there’s no denying that it was extreme.
Stunningly, Intel shares surged 10% midday on Oct. 28, the day after Intel released its quarterly earnings data. Were the results really all that great, though?
According to the press release, Intel’s third-quarter GAAP revenue of $15.3 billion was down 20% year-over-year. Also, the company’s non-GAAP revenue of $15.3 billion indicated a 15% YOY decline.
So far, not so good. Intel CEO Pat Gelsinger claimed that his company delivered “solid results,” but the numbers suggest otherwise. Here are some GAAP-measured YOY percentage changes to keep the bulls at bay:
- Gross margin: down 13.4%
- Operating margin: down 28.4%, and flipped from positive to negative
- Net income: down 85%
- Earnings per share (or EPS): down 85%
A Bearish Analyst Sticks to His Guns
After Intel released its quarterly earnings data, Rosenblatt Securities analyst Hans Mosesmann reiterated his “sell” rating on INTC stock. Additionally, the analyst reduced his price target on the shares from $30 to $20.
In one power-packed sentence, Mosesmann cogently summed up the bearish case against Intel.
“Weak outlook across the board and a macro malaise expected to continue well into 2023 creates an immensely delicate balance in committed CapEx expansion, FCF neutrality targets, share losses in data center, non-trivial employee reduction efforts, and a foundry services business that will take years to play out,” Mosesmann said.
There’s a lot to unpack in that statement. It is notable that Intel’s Foundry Services unit’s revenue was down 2% YOY in Q3 2022. Plus, Intel’s projected GAAP-measured full-year net capital spending is a hefty $25 billion.
Additionally, Mosesmann’s point about the weak outlook certainly applies to the PC market, while the overall “macro malaise” could cause problems for Intel over the coming quarters.
Finally, it’s worth mentioning that Intel lowered its full-year 2022 outlook for both revenue and earnings. It’s troubling to consider that this is the second time this year that Intel has reduced its revenue forecast for 2022.
What You Can Do Now
It might be tempting to jump into a trade because a stock posted a quick gain. However, sensible investors must also look at the bigger picture and the relevant data points.
In the case of Intel, the bigger picture shows a long-term downtrend in INTC stock. As for the data points, Intel’s slowdown across multiple fiscal metrics means that investors should be wary because the next few months could be scary.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.