Investors are betting that things just can't get any worse for chip-making legend Intel (INTC).
Intel stock popped as much as 5% on Friday, hours after the company posted its biggest-ever quarterly loss amid a slump in PC demand.
"All of the steps of our turnaround are underway," Intel CEO Pat Gelsinger said on Yahoo Finance Live (video above). "Investors are looking at it and seeing a bit of the green shoots, as we have described, starting to emerge in the Intel turnaround story."
Gelsinger pointed to signs of a bottom in the PC market and better execution in building a pipeline of faster chips for customers.
But many analysts say some of those "green shoots" are still hard to find.
The company saw sales plunge 36% from the year-ago period on tepid PC sales and continued to lose market share to rival AMD (AMD) in the data center business. Gross profit margins — a key performance metric for a chip company — dropped to 38.4% from 53.1% a year ago as Intel incurred costs to build out its foundry business.
Intel's second quarter profit guidance also came up short relative to analyst estimates.
"I have no idea what the company looks like in five years," Bernstein analyst Stacy Rasgon said on Yahoo Finance Live, calling Intel's quarter "horrible."
"The chances of success are not guaranteed," he added. "I think it's a hard thing to own, structurally."
Intel's earnings rundown
Net Sales: -36% year over year to $11.72 billion vs. estimates for $11.11 billion
Adjusted Diluted EPS: -105% year over year to a loss of 4 cents vs. estimates for $0.00
What else caught our attention
Second quarter revenue guidance of $11.5 billion to $12.5 billion: 1) would mark a 34.8% year over year decline at the mid-point of the range; 2) was above the consensus analyst forecast of $11.7 billion.
Second quarter non-GAAP EPS guidance of a loss of 4 cents was worse than consensus estimates looking for modest profits.
Second quarter gross margin guidance of 37.5% would represent a sharp decline from 44.8% a year ago.
Intel continues to expect to sell 270 million PC units in 2023.
Wall Street's reaction
"We believe the upside from the stabilizing PC market is offset by continued share loss to AMD and the data center correction due to the recession," Citi's Chris Danely wrote. Danely has a Neutral rating on the stock.
"A bottom seems to materialize, with an inventory correction expected to be complete mid-year, gross margin troughing in 2Q, while Intel 3 represents the real potential stock mover," Baird's Tristan Gerra said (Neutral rating). "Uncertainties around 2H demand and manufacturing execution around Intel 3 remain potential hurdles. A successful Intel 3 ramp would represent a coup for Intel, with customers regaining confidence in Intel's product roadmap. Net, all the bad news appear to have finally settled in, but future process execution remains speculative, and we expect AMD to gain further share this year."
"INTC expects a modest recovery during 2H but does expect enterprise and China/Rest-of-World to recover faster than other markets," Stifel's Ruben Roy said (Hold rating). "While competitor AMD is likely to experience similar macro headwinds, we continue to expect market share gains to act as an offset. Consequently, we continue to prefer AMD shares at this time."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email [email protected]
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