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Intel's Struggles Continue – Is It Time to Buy or Stay Away?

Today, I'm diving into Intel's recent earnings report, the dividend suspension, it’s impact on the stock, and whether this crash presents a buying opportunity.

Let’s do this!

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THE KEY STORY

The END Of Intel Stock?

A Tough Day for Intel

Intel had a rough day, with its stock down 5.5%. Following the release of their Q2 earnings report, the stock plummeted an additional 18.9% after hours. This new stock price of $23 is the worst Intel has seen since 2013, even lower than the fall 2022 price. So, what went wrong?

Dividend Suspended Indefinitely & Earnings Overview

Intel reported a surprise loss, with earnings far below expectations. They also provided guidance for an even worse Q3 and announced the suspension of quarterly dividend payments starting in Q4 2024. This follows a 65% dividend cut in 2023. Intel also announced a cost-cutting program, including a reduction of 15,000 employees.

Keep Reading For My Thoughts On Intel Stock…
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My Intel Stock Failure

Many of you know that Intel was one of my worst investments. I started buying in early 2022, expecting reliable cash flows and growth from their Foundry model. However, the company’s performance declined and Capex Ballooned, leading me to sell in fall 2022 and invest in Microsoft instead, which has returned 74% since then.

Challenges in Semiconductor Manufacturing

Semiconductor manufacturing is extremely expensive. Intel’s client computing group, primarily CPUs for PCs, is not a growth business and faces significant competition from AMD, ARM, and companies like Apple. After the stay-at-home boom, Intel’s cash from operations fell from $35 billion to $1 billion in 2023, while capex grew from $14.5 billion to $25 billion, resulting in negative free cash flow. In fiscal 2023, Intel posted a horrific -$14.28 Billion in Free Cash Flow. This trend is not improving so far.

Q2 2024 Earnings Report

For Q2 2024, Intel reported:

• Revenue: $12.8 billion, down 1% year-over-year.

• GAAP EPS: -($0.38), with non-GAAP EPS at $0.02 per share.

• Q3 Guidance: Revenue expected to be $12.5 billion to $13.5 billion, down from $14.16 billion in Q3 2023.

• Q3 Guidance: GAAP EPS of -($0.24) per share, with non-GAAP EPS at -($0.03) per share.

Intel also announced a 15% reduction in headcount and suspension of dividend payments starting Q4 2024.

Segment Performance (Revenue)

• Client Computing Group: $7.4 billion, up 9% year-over-year.

• Data Center and AI: $3 billion, down 3% year-over-year.

• Network and Edge: $1.3 billion, down 1% year-over-year.

• Intel Foundry Business: $4.3 billion, up 4% year-over-year, but with $2.8 billion in losses.

Long-term Prospects and Balance Sheet

Intel is working to reduce operating expenses, capex, and cost of sales to improve profitability, but significant improvements may not be seen until fiscal 2025. The Intel Foundry business has long-term potential, but it remains highly capital-intensive. Despite current struggles, Intel has a strong balance sheet and resources to pivot towards profitability.

Investment Considerations

While there is a potential long-term value play, the near-term outlook is fraught with negative catalysts. Prior to the earnings report, the consensus price target was $48.88, implying significant upside. However, this is likely to be revised downward following the recent results.

Conclusion

Intel faces significant challenges and uncertainty in the short term. While it may be a long-term value play, there are many risks to consider. Personally, I’m not convinced it’s the right time to invest in Intel, especially from a dividend perspective. I’ll be keeping an eye on developments but remain cautious.

Disclaimer: This is not personal financial advice. Please do your own research before making any investment decisions.

THE NEWS

Amazon Stock Falls 6.8% After Q2 Earnings

1. Intel Stock Crashes 18% After Q2 2024 Earnings Results (Intel Investor Relations)

2. Amazon Q2 2024 Earnings Results (Amazon Investor Relations)

3. Apple Q3 2024 Earnings Results (Apple Investor Relations)

4. Hershey Q2 2024 Earnings Results (HSY Stock Investor Relations)

Thanks for the read! Let me know what you thought by replying back to this email.

- Zach
Dividend Data

Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter