Reports Q2 2021 results on Thursday, July 22 after market close
Expected Revenue: $17.8 Billion
EPS forecast: $1.07
In the past year, Intel (NASDAQ:) has been a dead investment for semiconductor investors. At a time when competitors tempted customers with new and faster chips, production declines have hurt the largest US chipmaker.
While other chip makers have seen their stock prices skyrocket over the past 12 months as they benefit from pandemic-fueled demand for chips used in cars, laptops and game consoles, Intel's stock has barely increased. In fact, it dropped more than 9%, while NVIDIA (NASDAQ:) – one of its biggest competitors – gained more than 80% in value.
Given these entrenched manufacturing issues and the company's ongoing restructuring, California-based Intel is unlikely to generate revenues that create excitement among investors.
That trend was evident when the company released its product in April, with a drop in data center revenues and a sharp drop in gross profit margins. That signaled to investors that the company was losing market share to rivals and customers who design their own components.
For the quarter ended June 30, analysts expect revenues to fall about 10% from the same period a year ago to $17.8 billion. And earnings per share are expected to drop to $1.07 from $1.23 per share. Executive Officer Pat Gelsinger will turn the tide and help the semiconductor giant overcome its manufacturing challenges. Gelsinger has put Intel into "investment mode" during a critical period to return to leadership, promising that he will deliver products that are once again the best in the industry.
Early this year, Gelsinger unveiled a plan that included creating a $20 billion new foundry that will produce chips for other companies. He also plans to use rival factories to outsource production of other Intel components.
Last week, the Wall Street Journal reported that Intel is investigating a deal to acquire GlobalFoundries Inc. to accelerate his plans to make more chips for other tech companies. If that deal goes through, according to the paper, it will be Intel's largest and could value GlobalFoundries at about $30 billion.
However, Wall Street analysts are paying dividends on Intel's prospects, despite pressure from the company to transform its company into a chip maker for others, a market dominated by Taiwan Semiconductor Manufacturing (NYSE:).
Chart: Investing.com
In a poll of 42 analysts covering the stock by Investing.com, 17 have a buy recommendation, 15 are neutral, while 10 are calling for the stock to sell. The consensus price target for the next 12 months points to an increase of nearly 14%.
Bottom Line
Intel continues to spiral downward, hurt by its manufacturing flaws and the loss of market share to competitors. That situation is unlikely to change in the short term, making the stock suitable for a long-term turnaround bet. In line with that trend, today's earnings are likely to show weakness in both sales and margins.
