Intel shares crash after report release

Intel shares crash after report release 23 / 10 / 20 Kuantyay Sabaaymi Visitors: 145 Rating: ★★★★★

Intel published financial results for the third quarter of 2020. During the main trading session, shares rose 0.7%, but in the evening session, securities fell 9.4%.

Briefly about the main

- Financial results were above expectations. In the future, we can expect an increase in indicators
- The company launched the third chip factory
- Quotes are declining amid negative results from the data processing segment
- Competitors exploit Intel's current weakness

Key Financial Highlights for Q3 2020

- Revenue decreased by 4% y / y to $ 18.3 billion
- Operating profit fell 22% y / y to $ 5.1 billion
- Net profit decreased by 29% y / y to $ 4.3 billion
- Earnings per share (EPS) was $ 1.02 (-25% YoY) and adjusted $ 1.11 (-22% YoY)

More details

The company's revenue was above investors' expectations, and the adjusted EPS showed the expected result. Revenue growth was mainly supported by strong demand for laptops, which helped keep the business from further losses amid the negative impact of the coronavirus. This business segment grew by 1% to $ 9.8 billion.

Intel continues to launch new products in segments such as artificial intelligence, 5G networks and intelligent autonomous peripherals.

The third 10nm processor plant is fully operational and is expected to result in more chip shipments in 2020 - 30% more than expected in January.

Why stocks fell

Intel's business has two broad areas:
- Data-centric is related to data processing and company service
- PC-centric focuses on chips for personal computers.

The largest division in Data-centric is DCG, with mixed results, with a 47% y / y decline after a 30% rise in the last two quarters. The consensus forecast assumed revenue from this segment in the amount of $ 6.2 billion in the third quarter, the company showed results at $ 5.9 billion.

Intel believes the pandemic is the root cause. At the same time, the company raised its forecasts for the IV quarter: revenue is expected at $ 17.4 billion, and adjusted EPS - $ 1.1.

As a result, we have a mixed picture explaining the decline in stocks. On the one hand, financial results are growing and are expected to continue to improve, on the other hand, the decline in the data processing segment is negative for securities. It can be assumed that data processing from Intel has become less valued in the market, and this may lead to a drop in revenue from the segment in the future.

What else

Do not forget about the main competitor - AMD, which recently presented new processors. From the technical point of view, processors from AMD are many times more powerful, which the company did not fail to emphasize at the presentation, comparing its products with Intel. AMD and Nvidia are capitalizing on Intel's challenges in a competitive marketplace by rapidly gaining market share in PC and server processors.

For Intel, the key to regaining market share in the DCG segment could be the production of cheaper or more powerful processors. This is facilitated by the launch of a new plant for the production of chips. However, this does not yet look convincing to investors, which is why the company's shares are losing value.

Technical analysis

On the daily chart (taking into account the movement after trading), the price has dropped below the 50-day moving average and continues to be below the 200-day moving average. MACD curves tend to cross - a signal to start a downtrend. Due to the current lack of growth drivers, as well as yesterday's negative pressure from sellers, we can assume that quotations will continue to decline in the medium term.

To resume growth, it will be necessary to gain a foothold above $ 52.5, which will open the way to levels above $ 56, where the 200-day moving average is now located. You will also need to overcome the $ 60 mark, where after the negative news about the delay in the release of the new processor, there was a gap down. In this case, the technical picture will improve and the uptrend will resume. Such a scenario is possible, but not yet relevant.

Intel shares have been under pressure since the beginning of the year and are down 9.9%. According to the company, we can expect positive financial results in the 4th quarter, but there are no significant drivers for the growth of shares so far.

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