Intel Tumbles, Setting Up Worst Day Since 2008

(Bloomberg) -- Intel shares tumbled on Friday, after the chipmaker cut its full-year revenue outlook, the latest sign that the 2019 rebound in semiconductor stocks may be overdone.

Analysts were cautious on the outlook, with both Citi and Bernstein writing that even the lowered view still seemed aggressive. That said, Intel did find some fans; Morgan Stanley and Nomura were among those that maintained positive views, seeing longer-term potential.

The stock dropped as much as 10 percent in early trading. Should it end the session with a decline of that magnitude, it would represent the biggest one-day percentage drop since September 2008, which was during the financial crisis.

Here’s what analysts are saying about the results:

Jefferies, Mark Lipacis

“We view an annual decline in [Datacenter Group] as a critical inflection for INTC, as ’DCG growth’ has underpinned the INTC bull case.”

The bull case “may now need to shift to ’INTC is a cost cutting story.’ ”

Reiterated underperform with $40 price target.

Citi, Christopher Danely

Even with lower guidance, “there is still downside” to Intel’s 2019 outlook. The outlook is “still too aggressive,” as it “requires mid-teens revenue growth for 3Q19 and 4Q19, which hasn’t happened in 10 years.”

Reiterated neutral rating and $50 price target.

Bernstein, Stacy Rasgon

“Even the new lowered outlook continues to require a sharp 2H recovery especially in data-centric areas (just off a lower base now).” This would necessitate “the strongest 2Hv1H datacenter ramp we’ve ever seen, as well as NAND, [Internet of things], and other portions of ’data-centric’ revenues to grow double digits.”

Kept underperform rating and $42 price target.

What Bloomberg Intelligence Says:

“Weakness in data-center chip sales in 2Q and in China, plus insufficient strength in 2H may have been behind Intel’s decision to cut full-year revenue guidance, with sales potentially falling by 3% to a level below 2018.”
-- Anand Srinivasan
-- Read the report here

Deutsche Bank, Ross Seymore

“While we are disappointed by the company’s guidance and expect the stock to pullback as a result, we remain confident in INTC’s ability to weather the storm and implement structural improvements over time to unlock greater amounts of EPS and FCF power.”

Affirmed buy rating; price target to $62 from $65.

Nomura Instinet, David Wong

“While the semiconductor downturn is clearly continuing to affect Intel (and other chip companies), we remain positive on the stock, given the company’s solid profitability and its leadership in what we think will be some of the most promising semiconductor end markets.”

Cut earnings expectations for 2019 and 2020 but affirmed buy rating and $65 price target.

Morgan Stanley, Joseph Moore

“The environment is worse than our below-consensus numbers, as industry conditions are tough.” Remains cautious on the semiconductor industry overall, although “the self-help part of the transitional story seems to be playing out even quicker than we thought.”

Affirmed overweight rating; price target $63 from $64.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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