Intel Earnings Preview: Demand Recovery To Offer Pivotal Clue To Stock’s Outlook
Investing.com | Jan 23, 2020 09:39
* Reports 4Q results on Thursday, January 23, after the market close
* Revenue Expectation: $19.2 billion
* EPS Expectation: $1.25
The dramatic turnaround in chip stocks this year will see its first big test today when the industry leader Intel Corporation (NASDAQ:INTC) reports its fourth-quarter earnings after the market close.
After the powerful rally this year in computer chip manufacturer shares, these companies now have little room for error. Investors have built a strong bullish case for the sector that went through a big sell-off in 2018, hurt by the escalating trade war between the U.S. and China.
The Philadelphia Semiconductor Index — which includes some of the world’s largest chipmakers such as NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) as well as Intel — has surged more than 60% in the past year. Intel stock, which rose more than 3% yesterday to $62.73 a share, has so far lagged behind in this rally, rising 28% during this period.
According to analysts’ consensus forecasts, the third quarter likely marked the bottom of the industry’s down cycle. Growth will then continue to accelerate. By the third quarter of 2020, semi earnings are expected to expand faster than software companies.
The index hit a fresh record yesterday on hopes that the biggest chip producers, like Intel, will not only report a strong quarter, but will give a bullish forecast for this year. And there are many catalysts that support this view.
h2 5G and Datacenter Demand/h2World Semiconductor Trade Statistics, an industry group that monitors the sector, predicts the chip market will rebound from last year's decline to 6% growth this year. While global trade conflicts and the 2020 elections in the U.S. pose potential risks, the market outlook remains bright, helped by the rollout of 5G services and the "hyperscale” datacenter capital investment cycle.
Intel is certainly well-positioned to take advantage of this strength. In its 3Q earnings report, Intel raised its full-year guidance, benefiting from the surge in investments in datacenters by some of the world’s largest corporations, such as Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).
On the PC side, things also look quite bright for Intel, which is the largest parts supplier for the industry. Fourth-quarter sales of personal computers were the best the industry has seen in years, according to data released last week by market research firms IDC and Gartner.
Get The App
Despite these positive catalysts, Intel has to show it’s making progress in overcoming its production challenges and bringing to the market the most efficient and powerful chips in the highest volumes. Intel's biggest competitive threat right now is from Taiwan Semiconductor Manufacturing (NYSE:TSM), which is rapidly gaining market share.
Bottom Line
Intel’s wide moat and massive R&D spending continue to make its shares a good long-term bet. With its cash-cow PC business intact and a solid dividend yield of 2%, on an annual payout of $1.26 per share, Intel remains an attractive option to include in an investment portfolio.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.