An Intel sign is seen at the Intel Museum in Santa Clara, California
Josh Edelson/AFP/Getty ImagesThis hasn’t been a kind year for Intel stock. Shares have fallen just over 9% in 2020, buffeted by the Covid-19 pandemic in March as much of the market was, but then punished once again in late July after it disclosed a further delay in its next major new chip manufacturing technique.
The embarrassing disclosure in July triggered something of a reverse, as much smaller rival Advanced Micro Devices (ticker: AMD) stock gained roughly the amount Intel (INTC) lost. The company also said that it was mulling hiring an outside fabricator to make some of its chips, something of a stunning disclosure from a company whose long-time strength has been in the vertical integration of its chips.
Another shift occurred earlier this week, when Intel announced Monday that it was selling most of its flash memory business to SK Hynix (000660.Korea) for $9 billion in cash. It’s a deal that many on Wall Street thought was a long-time coming, as the so-called NAND business had given more losses than profits to the 52-year-old chip maker.
It’s with this background that Intel is set to report earnings Thursday after the closing bell, with a conference call set for 2 p.m. Eastern time.
There are uncertainties baked into the stock at this point, but it’s worth remembering that Intel is an order of magnitude larger by sales and profits than its closest rivals. Analysts estimate that the company will report adjusted third-quarter earnings of $1.10 a share on revenue of $18.22 billion. It’s expected to post GAAP profits of $1.04 a share.
By contrast, AMD is expected to report third-quarter sales of $2.56 billion.
Investors should expect Intel CEO Bob Swan to talk about the NAND unit sale, and what it means for the business, and there will likely be many questions from analysts about it since the company didn’t hold a conference call with Wall Street following the divestiture announcement.
But one thing investors really would like to know about is the so-called seven-nanometer fabrication process. CEO Bob Swan has previously told Barron’s that the company is having yield issues toward the front end of the fabrication technique, and that it’s a question of achieving yields that will result in profits.
“Of course, what’s truly important for INTC isn’t the short term trends, rather it’s their ability to fix their manufacturing problems to close the gap with Taiwan Semiconductor Manufacturing and AMD,” Raymond James chip analyst Chris Caso wrote in a note previewing the results. Caso wrote that he hasn’t had a positive view of the stock for several years, because the company’s CPU performance gains have flattened, and its manufacturing processes have fallen behind.
“What we don’t yet know is management’s remedy plan, which presumably will involve some degree of outsourcing, which could be highly beneficial to cash flow—if outsourcing can be implanted in time.”
Maybe investors will get some hints Thursday.
Write to Max A. Cherney at max.cherney@barrons.com
October 22, 2020 at 07:03AM
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Intel Earnings Report Preview: What to Know - Barron's
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