Intel earnings preview: Revenues expected to collapse as demand takes a hit

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Intel earnings are expected to collapse, but could the dire market forecasts provide the basis for outperformance?

 

Source: Bloomberg

 

Indices Shares Intel Market trend Revenue Technical analysis

 Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 26 January 2023 

When will Intel report their latest earnings?

Intel are expected to report their fourth quarter 2022 earnings (Q4) after market close on Thursday 26 January, 2023.

What should traders look out for?

Tech stocks have been in the firing line of late, with concerns over a spending slowdown bringing questions over elevated pricing multiples. This tech giant is no different, with both revenues and earnings expected to come in sharply lower than a year ago. There have been significant concerns over demand for Intel computers as the economic crunch brings a high likeliness that individuals and businesses hold off on upgrading their models for now. Notably, research from IDC highlighted a 28.1% collapse in global PC shipments in Q4, with an additional 5.6% decline expected over the course of 2023.

The cost-cutting theme seen throughout the sector will likely come into play for Intel too, with the firm already pledging to cut $10 billion through to 2025. How quickly they can make those savings will be important for investors as it will improve the bottom line as demand heads lower. With 72% of the S&P 500 tech stocks that have reported thus far having beat earnings, and 78% beating on revenues, there is an argument that Wall Street has provided a low bar this quarter. Will that be the case this time around for Intel?

Intel earnings – what to expect

Revenue – $14.45 billion vs $15.34 billion (Q3 2022), and $19.53 billion (Q4 2021).
Earnings per share (EPS) – $0.20 vs $0.59 (Q3 2022) and $1.09 (Q4 2021).

Intel earnings – valuation and broker ratings

Analysts are very mixed and cautious for Intel stock, with just four ‘buy’ or ‘strong buy’ recommendations out of 41. Of the remaining analysts, there are a whopping 25 ‘hold’ recommendations, and 12 ‘sell’ or ‘strong sell’ ratings.

Source: Eikon

Intel shares – technical analysis

The weekly Intel chart highlights the collapse we have seen since the March 2021 peak, with price down 53% since that high. However, we have seen some stabilization for the stock of late, with price regaining ground from the $24.21 lows seen in October. A push up through the recent $31.33 peak would bring expectations of a wider rebound for the stock, confirming the creation of a higher low and fresh higher high. This upcoming earnings report should provide us with greater knowledge of whether that is possible or whether we are on the cusp of another bearish turn. The hope for the bulls will be that market predictions of a collapse in earnings and revenues will be overdone, allowing for outperformance despite declining numbers.

Source: ProRealTime

The daily chart highlights how price has managed to push up through all the Fibonacci levels, raising the likeliness that we are set for an upside break. Nonetheless, until resistance breaks, the risk of another turn lower remains. A move back through the $28.24 low would bring about greater confidence in a bearish continuation for the stock.

Source: ProRealTime