Intel Earnings Up In The Cloud, Overcome Spectre Meltdown

Semiconductor giant Intel Corp $INTC announced better than expected fourth-quarter earnings after the market close Thursday sending the stock up almpst 10% in early markets and the Dow Jones to another record high.

Semiconductor giant Intel Corp $INTC announced better than expected fourth-quarter earnings after the market close Thursday sending the stock up nearly 10% in early markets and the Dow Jones to another record high.

Reaction > Intel Corporation NASDAQ: INTC

Jan 26 11:00 AM EST 49.70 +4.40 (+9.70%)

Earnings:

Adjusted earnings of $1.08 per share beating estimates of $0.87 per share on revenue of $17.1 billion beating analysts’ estimates of $16.34 billion. Intel responded strongly after it had been facing stiff competition from $AMD, Samsung and $NVDA in particular as their rivals chips excel in everything from gaming to cryptocurrencies usage.

Spectre and Meltdown Flaws

These earnings were the first ffrom Intel after the disclosure of major security flaws known as Spectre and Meltdown. Google engineers decribed the flaws on January 3 with vulnerabilities affecting every major CPU maker with Intel taken the brunt of the impact as its chips are affected more than others with them built into Intel’s hardware.

Intel announced they will shipping chips without the flaws later this year. Intel CEO Brian Krzanich said “We’ve been working around clock, ee’re acutely aware we have more to do.

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Outlook

Guidance for first quarter forecasts revenue of $15 billion (plus or minus $500 million) and non-GAAP operating margins of 27%. EPS is forecast at $0.70. The consensus estimates called for revenues totaling $15.03 billion and EPS of $0.72.

For the full fiscal year, Intel guided revenue to $65 billion, plus or minus $1 billion, compared with fiscal 2017 revenue of $62.08 billion. The consensus estimate had been $62.05 billion.

Full-year operating margins are forecast at 30% and full-year adjusted EPS is forecast at $3.55. The consensus EPS estimate is $3.27

Mobileye

Intel’s completed the buyout of autonomous driving systems specialist Mobileye after clearing regulatory approval in several countries and approval from Mobileye’s shareholders last quarter.

Intel’s New Chips and AMD

On the competitive front both Intel and rival Advanced Micro Devices $AMD, who had a blowout quarter last two time around, have released several brand new processors last year. We have seen a migration to $INTC’s upcoming Coffee Lake-S series of chips from the mainstream Core i5 and Core i7 desktop processors. This is competition for AMD’s Ryzen and EPYC products that gamers have taken too.

Interesting point with the hot Bitcoin market is cryptocurrency miners use graphics cards from AMD and Nvidia $NVDA to mine new coins which can then be sold or held for future appreciation. AMD traditionally has the reputation as the mining go to at this point. AMD said they are still prioritizing its core gaming market while watch developments in digital currencies.

Samsung

Intel faces stiff competition from Korea’s Samsung also, who reported record operating profit of 8.03 trillion Korean won ($7.21 billion) in its semiconductor division in Q217. Revenues were 17.58 trillion Korean won or $15.78 billion.The semiconductor accounts for over 57 percent of its entire earnings. 

Samsung overtook Intel in the first quarter of 2017 for the first time when it reported operating profit in its chip unit of 6.31 trillion Korean won ($5.66 billion). That easily beat Intel’s $3.9 billion. Revenues were lower than Intel, highlighting Samsung’s profit margin. This is because the NAND and DRAM chips Samsung produces, demand is over supply as data centers are growing along with phones and laptops. 

NVidia

NVidia position is well summed up by Jeffries July 10 Client note last year where they downgraded Intel from hold to underperform. Jefferies lowered it’s 2018 price target to $29 from $38. Highlights from their note:

  • Intel has the “most to lose” in the “4th tectonic shift in computing.”
  • “NVDA was the first to recognize and successfully invest in a HW/SW platform (GPU/CUDA) targeted specifically at parallel processing applications, and our field checks suggest it is years ahead of its competition.”
  • “its Xeon/Xeon PHI platform is disadvantaged vs NVidia in emerging parallel workloads like deep neural networks”

 

Sources: Intel, ADM, Samsung, Reuters, Alphastreet

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