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Why Are Intel Shares Trading Lower Today?

October 22, 2021 8:31 am
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Why Are Intel Shares Trading Lower Today?

Analysts downgraded ratings and lowered the price targets on Intel Corp (NASDAQ:INTC) following its Q3 2021 earnings results.

Mizuho analyst Vijay Rakesh downgraded to Neutral from Buy with a PT of $55, down from $70, implying a 1.79% downside based on Thursday's closing price of $56.00.

On its earnings call, the company announced a significant 100% ramp in foundry investment, resetting gross margins lower over the next couple of years, Rakesh notes.

The analyst now believes Intel's "capital-intensive" foundry shift "adds uncertainty to its likelihood of catching up to leading-edge." Further, the margin reset to 51%-53% from the current 56% over 2-3 years "could be difficult to recover," Rakesh adds.

Morgan Stanley analyst Joseph Moore downgraded to Equal Weight from Overweight with a PT of $55, down from $67.

Deutsche Bank analyst Ross Seymore lowered the PT to $55 from $58 and reiterated a Hold rating on the shares.

While Intel's earnings report and guidance were " mildly disappointing," the more important news was the delay of the company's analyst day to February 2022 and the early unveiling of its 2022 and mid-term financial targets, Seymore notes. The financial metrics yield earnings and cash flow "significantly below" Street expectations.

UBS analyst Timothy Arcuri downgraded to Neutral from Buy with a PT of $58, down from $73, implying a 3.6% upside. The company's "unexpected" disclosure around the new long-term financial model that includes CAPEX and margin trajectory pushes out Intel's free cash flow recovery, Arcuri notes.

Arcuri adds, however, that while the 51-53% gross margin targets for the next 2-3 years are not great, it is also not terrible given the range that some investors had feared.

Barclays analyst Blayne Curtis lowered the PT to $45 from $50, implying a 19.6% downside, and affirmed an Underweight rating on the shares following last night's results.

The analyst day may be delayed, but the disappointment came early as the company laid out long-term targets showing sustained gross margin pressure and "spiraling" Capex costs into a likely PC downturn coupled with further market share loss, Curtis notes.

Price Action: INTC shares traded lower by 9.63% at $50.63 in the premarket session on the last check Friday.

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